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GFL LtdQ3 FY18

GFL Ltd Q3 FY18 Earnings Call Analysis

Revenue, margin, capex, fundraise and order book outlook from management commentary.

Price: ₹46.6P/E: 424.9Market Cap: ₹501 CrSector: Finance

Management growth scorecard

Revenue

Category 2

Margin

Category 3

Fundraise

N/A

Order

Yes

Capex

Yes

2 of 4 growth signals are positive.

Full analysis

Revenue guidance

Category 2
  • →PTFE sales volumes expected to grow from ~1,300 tons/month in 2018 to ~1,750 tons/month by 2020, achieving full expanded capacity.
  • →Value-added PTFE share projected to increase to about 55%, with granular PTFE at 45%.
  • →Fluoropolymers production anticipated to ramp up from ~100 tons/month to 800-900 tons/month by March 2020.
  • →New fluoropolymers and specialty FluoroSpecialty chemicals expected to reach ~50% capacity utilization in the first year, with gradual ramp-up over five quarters.
  • →Incremental revenues: Rs. 600 crores from Fluoropolymers and Rs. 300-400 crores from FluoroSpecialty chemicals by March 2020.
  • →Continued pricing improvement in granular PTFE, especially in US and European markets due to reduced competition with Chinese products.
  • →Overall chemicals business volumes and revenues expected to increase significantly driven by these product expansions and capacity utilization improvements.

Margin guidance

Category 3
  • →Expect significant ramp-up in revenues and profitability over next 4-5 quarters, driven by new fluoropolymer products and expanded PTFE capacity (Page 11).
  • →Value-added PTFE to increase to about 55% of production, granular PTFE at 45%, with improved pricing in US and Europe markets due to reduced competition with Chinese products (Page 16).
  • →Fluoropolymer product sales projected to ramp up to 800-900 tons per month by March 2020 from about 100 tons currently (Page 14).
  • →Incremental revenue potential: Rs. 600 crores from Fluoropolymers and Rs. 300-400 crores from FluoroSpecialty chemicals, expected by March 2020 (Page 7).
  • →Margins currently at ~29% in chemical segment; sustainable and likely to increase with higher contribution from value-added products (Page 8).
  • →Full utilization of expanded 21,000 tons PTFE capacity expected by calendar year 2020, with steady volume growth (Pages 6, 7, 16).
  • →PAT growth expected to continue supported by capacity ramp-ups and product mix improvement (Multiple pages).

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Fundraise plans

  • →No explicit mention of current or planned fundraising through debt or equity in the transcript.
  • →Discussed preferential issue in Inox Leisure; the loan to Inox Leisure (~Rs 160 crores) is expected to be converted into equity.
  • →For Inox Renewable loan (~Rs 200 crores), expected repayment within next 6 months.
  • →CAPEX guidance:
  • → - Rs 150 crores spent in H1 FY19 for Chemical business projects.
  • → - Remaining Rs 50-75 crores planned to complete current projects.
  • → - FY20 CAPEX blueprint ready but final plan to be shared next quarter.
  • →Demerger plan to list Chemical business separately may enable investor flexibility but no direct fundraising linked to this mentioned.

Order book

Yes
  • →The company mentioned a range of 40 to 50 megawatts capacity addition in wind farming with a capital expenditure of around Rs. 250 to 300 crores (Page 11).
  • →Wind Turbine manufacturing business has started seeing a turnaround with orders from SECI - 1 tenders, commissioning about 16 megawatts and clocking sales of 90 megawatts (Page 3).
  • →The company expects to ramp up capacity utilization in value-added fluoropolymers from current 100 tonnes per month to 800-900 tonnes per month by March 2020 (Pages 13, 15, 16).
  • →New fluoropolymer products and PTFE capacity expansions are expected to be fully utilized by the year 2020 (Page 8).
  • →Future capacity plans and CAPEX for FY20 are under formulation and expected to be finalized in the next quarter (Page 11).
  • →Loan repayments from related entities (Inox Leisure, Inox Renewable) are expected within the next 6 months (Page 15).

Capex plans

Yes
  • →Completed capex in Chemical business with a focus on ramping up new revenue streams such as fluoropolymers, specialty chemicals, and PTFE capacity expansion.
  • →Currently manufacturing only about 100 tonnes/month of new fluoropolymers, targeting 800-900 tonnes/month by March 2020.
  • →Total capex spent in H1 FY19 was around Rs.150 crores; remaining capex for current projects estimated at Rs.50-75 crores.
  • →Blueprint for FY20 capex is ready but not finalized; more clarity expected next quarter.
  • →Planned future expansion of PTFE capacity beyond 21,000 tonnes possible at a new Dahej site, 7-8 km from existing plant, with blueprints to be clarified in the first quarter of next year.
  • →Wind turbine business planning to add about 40 to 50 MW capacity with a potential capex of Rs.250-300 crores.
  • →Possibility of value unlocking through corporate restructuring including demerger enabling focused growth strategies.

How does GFL Ltd rank vs peers in Finance?

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1GFL Ltd
Rev 2Mar 3

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