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Baheti Recycling Industries Ltd

| H1 FY26 Earnings Conference Call

BULLISH SENTIMENT

Report Source

⬤15th Nov 25

Summary : Baheti Recycling reported record H1 FY26 profit, driven by strong demand and strategic expansion into aluminum wire rod, targeting significant capacity and revenue growth with new OEM clients.

Management Perspective positive : We are pleased to report that Baheti Recycling Industries Limited has delivered its highest ever profit for the first half of FY26. We are entering a decimating growth phase backed by our wire rod expansion. We are foreseeing a good EBITDA of around anywhere between 8 percentage to 10 percentage.

Concall Report Analysis & Insights

Business Overview

  1. Baheti Recycling achieved its highest ever profit for H1 FY26.
  2. Sustained demand for recycled aluminum in India drives performance.
  3. Company focuses on operational capabilities and industry-leading margins.
  4. Committed to sustainable growth and capital efficiency.
  5. Positioned as a partner for ESG-focused aluminum buyers.

Future Growth Prospects

  1. Setting up a new 12,500 MTPA aluminum wire rod facility, scalable to 25,000 MTPA by FY28.
  2. Capacity to ramp up to 38,000 tons, aiming for 63,000 tons total over two years.
  3. Wire rod project expected to generate INR200-250 crores revenue from 12,500 tons.
  4. Targeting INR1,200 crores revenue by FY28 through existing and new capacities.
  5. Anticipates 65% capacity utilization by FY26, 75% by FY27, and 85% by FY28.

Management Insights

  1. Delivered highest ever profit for H1 FY26, driven by sustained demand.
  2. Major expansion underway with a new aluminum wire rod facility.
  3. Market for aluminum wire rod is shifting from primary to secondary recycled supply.
  4. Focus on being cash flow positive, responsible, and maintaining margins while scaling.
  5. Improving working capital cycles and modernizing melting operations for efficiency.

Signs of Skepticism

  1. Initial confusion regarding inventory tonnage (90,000 vs 9,000 tons) during Q&A.
  2. Explanation for increased inventory/debtors days relies on new customer additions and industry norms.

Risk Factors

  1. Increased inventory and debtors days due to new customer additions and import-oriented business.
  2. Productivity declines during summer and rainy seasons due to excessive heat.
  3. Working capital cycle management is a challenge in the aluminum recycling industry.
  4. Uncertainty in trade deals could impact market, though tariff impact was minimal.

Good To Know

  1. Obtained IATF certificate in June, enabling direct targeting of OEMs.
  2. New OEM clients include Motherson, Caparo Maruti, and Ashley Alteams India Limited.
  3. Targeting OEMs like Ola, TVS, Yamaha, Hero, Bajaj for future business.
  4. Aluminum wire rod will serve steel industry (deoxidant) and cable industry (conductors).
  5. Secondary recycling industry to gain attention due to carbon emission focus and EPR regulations.

Key Drivers

  1. New wire rod facility.
  2. IATF certificate opens OEMs.
  3. EPR regulations drive demand.
  4. Capacity expansion to 63,000 tons.

Key Analyst Discussions

Competitive Environment

  1. USP lies in procurement and customized processing of over 50 types of aluminum scrap.
  2. Achieves 1% additional yield through specialized scrap processing, adding value to bottom line.
  3. IATF certificate differentiates company, allowing direct OEM engagement.
  4. Aluminum recycling is a distinct industry with its own norms, unlike copper or lead.
  5. Company aims to be a preferred partner for ESG-focused aluminum buyers.

Market Trends & Consumer Behavior

  1. Market for aluminum wire rod is shifting from primary to secondary recycled supply.
  2. EPR regulations and focus on carbon footprint accelerate demand for recycled aluminum.
  3. Cable industry is shifting from primary to secondary aluminum wire rod.
  4. Secondary recycling industry will gain attention due to global carbon emission concerns.
  5. ERP will mandate 5% recycled aluminum use, increasing to 10% going forward.

Financial Highlights

  1. Inventory and debtors days increased due to new customer additions and higher inventory for upcoming clients.
  2. Sustainable PAT margin targeted at 3.5% to 4%, with EBITDA at 8% to 10%.
  3. H1 margins were impacted by seasonal productivity dip during summer/rainy season.
  4. Company reported sales over INR315 crores, a 22% growth over previous half-year.
  5. Revenue guidance for FY25 is around INR650 crores.

Product Composition

  1. Current volume split: 58% aluminum alloying rod, 42% deox and other components.
  2. New wire rod facility will produce for steel deoxidant and conductor cable industries.
  3. Existing clients like ArcelorMittal, Tata Steel will be targeted for Phillip rod.
  4. New clients like Polycab, APAR, KEI, RR Kabel will be targeted for cable rods.

Strategic Considerations

  1. Wire rod facility capex is INR30 crores for 12,500 tons, with INR35 crores for 25,000 tons infrastructure.
  2. Wire rod production expected to start by H2 next financial year.
  3. Working capital for wire rod facility will be less, with 30-day credit period norms.
  4. Deleveraging of balance sheet expected in coming years from internal accruals.
  5. Capacity utilization targets: 65% (FY26), 75% (FY27), 85% (FY28).