Growth in sight, Valuations attractive, Maintain BUY
Huhtamaki’s Q3CY25 performance was better than our estimates as sales mix improved leading to better operating margins. Revenue declined YoY by ~4% but grew by 2% QoQ as lower volumes impacted sales, although realizations improved as contribution from premium product like blueloop increased during the quarter. Sluggish urban demand impacted FMCG volumes coupled with monsoon effect led to muted topline. Gross margins expanded by 367bps YoY but dipped slightly by 56bps QoQ to ~34% in Q3CY25. Employee cost has some one-off to the tune of Rs40-50mn, adjusting for the same, EBITDA grew by ~179% YoY & by ~18.5% QoQ largely because of cost efficiency measures & better product mix. The recent GST rate cut could provide some respite against muted demand, but it remains wait and watch on the consumer behaviour. The company “blueloop” range of products will focus on increasing value-added proportion in its product portfolio, although the pace of growth is slow but will increase going ahead as demand environment improves. The company is banking on this new set of range of blueloop to increase its visibility & offer niche products to its customers. This strategy will help the company to regain its lost glory & achieve double digit margins in the next 5-6 years. The current stock price factors in most of the negatives and can be a good accumulation point for investors for the long term. We maintain our BUY rating on the stock, ascribing 16x on June 27E EPS of Rs 20 per share.
Revenue grew QoQ; EBITDA margins expanded because of operational efficiencies & better product mix
The company’s Q3CY25 revenue declined YoY by ~4% but grew by slight 2% QoQ. Lower sales volumes were due to weak demand from urban market, monsoon pressures & uncertainty owing to GST rate cut. The company has significant room to increase volume as current utilization is ~60-65% & its new factory of Blueloop will incrementally provide support to volumes along with better margins.
Adjusting for one-off of Rs40-50mn, employee cost grew by ~1.4% YoY but dipped by ~8.6% QoQ to Rs651mn and stood at ~10.4% of sales in Q3CY25 as compared to ~11.6% in Q2CY25, while other expenses declined by ~16% YoY and ~1% QoQ to Rs961mn.
Adjusted EBITDA margin expanded by 531bps YoY and 112bps QoQ to ~8.1% in Q3CY25 led by improved product mix & better operational efficiencies.
The interest cost declined by ~40% YoY & ~5% QoQ to ~Rs29mn while the depreciation expenses grew by 5% YoY but declined by ~2% QoQ to Rs128mn.
Cost savings measures, noncore asset monetization & right strategy started yielding results
The company had embarked on ‘Project Parivartan’ (Transformation Project) which focuses on cost transformation, value added products, stronger price realisation to enhance better quality of growth to turnaround its performance. This strategy has yielded results for the company & we believe Huhtamaki is on the verge of a turnaround.
As the company is focussing on its value-added segment named “Blueloop” which has higher margins & better use case it also provides benefits like reducing input costs, wastage reduction, overhead optimization & improving productivity.
Valuation
The stock is trading at ~11.5x with an EPS of ~Rs20 per share as of Jun’27E. We are maintaining our multiple of 16x as further sales mix & better operational efficiencies are in sight & thereby arrive at target price of Rs 320 per share, upside of ~41% from current valuations. We have visibility of volume growth, strong balance sheet, cost optimization benefits & leveraging its blueloop brand which will increase its premium portfolio. The current stock price has factored in most of the negatives.
Thus, we maintain our BUY rating on the stock. Y/E Mar (Rs mn) Q3CY25 Q3CY24 YoY (%)
Huhtamaki India Ltd – Q3CY25 Result Update – SMIFS Institutional Research
