Nitin Spinners Ltd Q3 FY26 Earnings Analysis

- Capacity expansion underway: spinning capacity to increase by ~25%, fabric division capacity to more than double, driving future growth. - Incremental revenue from fabric expansion expected ~INR 1,000 crores annually once fully utilized (FY '28 onwards). - FY '27 revenue expected to increase by ~INR 400 crores from partial capacity ramp-up. - Current fabric revenues around INR 650-700 crores on 34-35 million meter capacity; post-expansion potential INR 1,300-1,400 crores annually. - Yarn volume stable; slight decline due to order deferrals expected to be recovered in current quarters. - Diversification into new geographies like UK, EU, Bangladesh, Turkey, and African markets planned to mitigate US tariff impact. - Growth driven by value-added yarns, blended yarns, and expanded fabric product basket targeting new segments (ladies, kids, uniforms, technical fabrics). - Expect volumes and revenues to at least reach prior year levels, with improvements post-normalization of market conditions.

- The company plans to increase revenues through a capex of about INR 1,100 crores, expanding spinning capacity by ~25% and fabric capacity by over 50%, partially benefitting FY '27 and fully FY '28 onwards. - Incremental revenue from expansion expected around INR 400 crores for FY '27, with full revenue potential of INR 1,300-1,400 crores from fabric capacity by FY '28. - The company targets IRR around 12-15% on new capex, similar to existing margins despite margin compressions currently. - EBITDA margins compressed to about 13.1% in Q2 FY '26 from 14% earlier; further margin normalization is expected in the next 2 quarters with tariff normalization and lower raw material costs. - Net profit and EPS saw some decline in H1 FY '26 but management expects revenues to at least reach last year levels while cost efficiencies and expansion aid growth. - Working capital expected to increase by INR 200-250 crores to support higher revenues. - Management avoids explicit margin guidance but growth driven by capacity expansion and market diversification.

- Nitin Spinners is undertaking a major capex of about INR 1,100 crores focused on: - Doubling fabric division capacity (more than 50% increase). - Increasing spinning segment capacity by around 25%. - The new fabric capacity will add about INR 1,000 crores in annual revenue when fully utilized (expected by FY '28). - Partial production from new capacity expected starting September of next financial year, with around INR 400 crores revenue expected in FY '27. - The capex aims to move up the value chain for margin improvement, adding low weight products, industrial fabrics, technical products, and expanding product range for existing customers. - Maintenance capex is minimal and mostly charged to revenue, with modernization costs of INR 45-50 crores planned over 1.5 to 2 years for existing plants. - Investments in renewable energy (18 MW) worth INR 17.9 crores to reduce power costs by ~5%.

- The company plans significant capex of around INR 1,100 crores mainly for capacity expansion in fabric and spinning segments. - They intend to fund this capex partly through debt while maintaining a prudent debt-to-equity ratio below 1:1. - The current average cost of borrowing is about 5.7% net of incentives. - Long-term debt-to-equity ratio stands at 0.53 as of September 2025, suggesting no immediate pressure from debt. - There is no explicit mention of raising funds through equity in the call transcript. - Management is focused on utilizing cheaper cost debt for growth without increasing financial burden. - No announcements or plans for fresh equity fundraising were indicated during the call.

- There is no explicit mention of a current or expected order book or pending orders in the transcript. - However, it is noted that some customers deferred deliveries due to prevailing uncertainty and tariff issues. - The company expects these deferred orders to be fructified in the ongoing/current quarter. - Demand recovery is anticipated in the second half of the financial year, supported by government duty relaxations and potential trade deals. - The company remains focused on customer retention through sustained engagement and product mix optimization. - Growth plans include capacity expansion in yarn and fabric segments, which should help increase sales volumes. - Overall, the company anticipates improvement in revenue and margin normalization going forward.