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Felix Industries Ltd

| Q3 FY26 Earnings Conference Call

BULLISH SENTIMENT

Report Source

⬤23rd Feb 26

Summary : Felix Industries, an environmental technology firm, is poised for significant growth driven by expanding waste management operations, new projects, and strong margins in India and the Middle East.

Management Perspective positive : Management expressed confidence in achieving targets, expanding operations, and the viability of their technologies. Phrases like 'very confident and very sure,' 'immense number of projects,' 'very hopeful that we will see bright 28,' and 'easy to touch next year' indicate a positive outlook.

Concall Report Analysis & Insights

Business Overview

  1. Felix Industries is an environment protection technology company, not a contracting company.
  2. They provide technologies for solid waste, water, oil and gas, and municipal waste recycling.
  3. The company operates in four major segments: water, oil, solid waste, and plastics.
  4. Business models include EPC (Engineering, Procurement, and Construction), BOO (Build-Own-Operate), BOOT (Build-Own-Operate-Transfer), PPP (Public-Private Partnership), and O&M (Operation & Maintenance).
  5. They focus on creating economically viable recycling solutions through circular economics.

Future Growth Prospects

  1. Plastic recycling capacity is expanding from 300 to 1,000 tons per month, targeting 6-7 crores monthly revenue.
  2. Waste oil processing in Oman is scaling from 30 TPD to 60 TPD in months, aiming for 100 TPD by next year.
  3. Expansion into UAE and Saudi Arabia is planned for waste oil processing after achieving 100 TPD in Oman.
  4. Metal recycling is in advanced discussions, with potential for 50 crores revenue in FY26-27.
  5. FY27 revenue guidance is 180-200 crores, with 15-20% growth expected thereafter.

Management Insights

  1. Q3 performance is excellent, and the company is on track to meet FY26 revenue guidance of 110 crores.
  2. The 6 Cr increase in other expenses for Q3 is a one-time civil expansion cost for an EPC project, completing by March.
  3. Oman waste oil processing is expected to generate 75-80 crores in revenue for the next financial year.
  4. The company aims to maintain an average blended EBITDA margin of 25-30%.
  5. They prioritize O&M projects for recurring revenue and better margins, pushing clients towards O&M contracts.

Signs of Skepticism

  1. Exact acquisition cost for plastic recycling contracts is not yet crystallized.
  2. Metal business discussions are advanced but described as 'subjective' until confirmed.
  3. Acid reclamation pilot plant is still under a 3-month testing phase for stabilization.
  4. The company has not yet repatriated profits from Oman, with initial funds going to repay loans.

Risk Factors

  1. Manpower limitations restrict the number of projects the core team can undertake.
  2. Government projects involve bureaucratic hassles and challenges in money recovery.
  3. New business segments like metal and acid reclamation are still in testing or discussion phases.
  4. Working capital requirements for larger O&M projects need bank enhancements.

Good To Know

  1. Felix has exclusive 40-year contracts for municipal plastic waste recycling in Ahmedabad, Baroda, and Surat.
  2. The company plans to apply for main board listing after completing audits in March.
  3. Current BOOT assets deployed are approximately 30-35 crores.
  4. Total debt includes 14 crores working capital and 4 crores from NBFCs.

Key Drivers

  1. Plastic recycling capacity expansion.
  2. Oman waste oil processing growth.
  3. New EPC contract deliveries.
  4. Potential metal business launch.

Key Analyst Discussions

Competitive Environment

  1. Felix's multi-purpose waste oil plant in the Middle East offers a unique advantage.
  2. Technical ability in mixed salt separation and hydrocarbon recycling provides a competitive moat.
  3. The Gulf region lacks official recyclers for the entire range of waste oil, creating a huge opportunity.

Market Trends & Consumer Behavior

  1. Strong demand for waste oil processing exists in Middle East countries.
  2. Industry focus on zero liquid discharge aligns with Felix's water processing solutions.
  3. The market for recycled plastics is robust, with government environmental credits as an advantage.

Financial Highlights

  1. Q3 other expenses increased by 6 Cr due to one-time civil expansion for an EPC project.
  2. FY26 revenue guidance is 110 crores, with 65 crores achieved in the first 9 months.
  3. EPC contract deliveries in March are expected to drive a significant Q4 revenue jump of about 25 crores.
  4. Oman waste oil processing is targeted to generate 75-80 crores in FY27.
  5. Blended EBITDA margins are expected to be maintained at 25-30%.

Product Composition

  1. The company offers EPC, BOO, BOOT, O&M, infrastructure development, and PPP models.
  2. Current focus areas include water, oil, solid waste, plastics, with metal and acid reclamation in development.
  3. Plastic recycling involves processing municipal waste into granules for sale.

Strategic Considerations

  1. Acquisition of a plastic recycling company is a cash deal, streamlining operations and adding capacity.
  2. Expansion of waste oil processing in Oman is a stepping stone for UAE and Saudi markets.
  3. Management is in discussions for large BOOT projects with major industries.
  4. The strategy emphasizes increasing O&M revenue for better margins and customer control.
Felix Industries Ltd (FELIX) Concall Report Analysis & Insights | Dhanarthi