Garware Hi Tech Films Ltd (GRWRHITECH) Q2 FY27 Earnings Call: Raises FY27 Margin Guidance To 27%, Sees Rs. 3,500 Cr Peak Revenue

Record Quarter Despite Cost Headwinds

• Highest-ever quarterly revenue of Rs.696 crore — Q2 FY 2026-2027 revenue grew +22% YoY and +10% QoQ; EBITDA rose +42% YoY to Rs.189 crore at a 27.2% margin (up 377 bps YoY), and PAT rose +42% to Rs.129 crore.
• Rs.37 crore combined cost headwind — raw material costs rose ~4% and logistics costs rose Rs.9 crore in Q2 FY 2026-2027 (also cited as Rs.35 crore+); management emphasized results were delivered despite this, offset by demand, improved realizations, favorable mix and operating leverage.
• H1 FY 2026-2027: revenue +25% to Rs.1,329 crore — EBITDA +49% to Rs.381 crore, PAT +50% to Rs.262 crore, PBT +51% to Rs.350 crore (PBT margin +464 bps to 26.30%), cash profit +46% to Rs.293 crore.
• 73% CPD / 27% IPD revenue mix in H1 FY 2026-2027 — value-added products contributed 86% of revenue; Q2 product split was sun control films 51%, PPF 24%, IP films ~25%, with exports at 80% vs domestic 20%.
• Cash of Rs.933 crore as of September 30, 2026 — working capital at 29 days vs 28 days in FY 2025-2026; Q2 geographic mix: US 51%, EU 15%, India 20%, Middle East plus nearby countries 12%.
• Q1 FY 2026-2027 EBITDA margin of 30.3% — management believes ~30% represents a sustainable seasonal level as product mix evolves; Q3 FY 2026-2027 is expected to be seasonally low with Q4 FY 2026-2027 recovering.

Raised FY27 Margin Guidance; Rs.3,500 Cr Peak Potential

• FY 2026-2027 EBITDA margin guidance upgraded by 200 bps to 27% (±2%) — from 25% ±2%; FY 2026-2027 revenue target reaffirmed at more than Rs.2,500 crore.
• Rs.3,000+ crore revenue targeted in FY 2027-2028 — management declined to confirm the analyst's Rs.3,100-3,200 crore scenario; FY 2026-2027 guidance stands at Rs.2,500+ crore per the presentation and opening remarks.
• Rs.3,500 crore peak revenue potential — at full utilization of existing capacities plus the completed TPU capex and the new sun control line (on stream by June 2027 / H1 FY28); timing to reach full utilization was not specified (period unspecified).
• Medium-term margin guidance of 27%+ plus 150-200 bps from TPU backward integration (FY28-FY31) — management expects 1.5-2% margin expansion in FY 2027-2028 and is targeting 28-28.5% for that year.
• TPU film line on track for commissioning in Q3 FY 2026-2027 — the Rs.191 crore solar control film capacity expansion (robotics/automation focus) is expected to reach commercial production in H1 FY 2027-2028, adding ~1,200 lakh sq. ft. of fungible capacity, expected to contribute Rs.450-500 crore depending on product mix.
• 6 capex projects totaling ~Rs.900 crore completed over the last 6 years (through FY 2026-2027), all self-funded — management aims for additional investments over the next 3 years (FY 2027-2028 onwards) to support architectural and TPU film businesses, subject to board approval; higher growth targets will be shared once the next capex is approved.
• Utilization at 75% (sun control) and 73% (PPF) in Q2 FY 2026-2027 — management expects both lines to reach almost 100% utilization by Q1 FY 2027-2028; PPF is expected to add ~Rs.250 crore at full utilization over current levels.

Fifth Growth Vertical with Backward Integration

• TPU resin sourcing tie-up with Lubrizol — described by management as the world's number-one resin supplier; the tie-up covers the entire TPU output, with Lubrizol earning margin on resin supply, Garware on film sales, and Lubrizol actively introducing Garware's film to OEMs globally; the line is the first of its kind in India.
• 75% of TPU output earmarked for captive PPF use — lowering TPU manufacturing cost and driving consolidated EBITDA margin expansion of 150-200 bps (period unspecified); 25% merchant sales expected to add Rs.75-100 crore of revenue in FY 2027-2028 (not FY 2026-2027).
• ~35% EBITDA margin targeted for TPU (period unspecified) — management cautioned the line is yet to be commissioned.
• TPU-based product lines become the fifth vertical — after industrial products, automotive sun control, PPF, and architectural sun control; applications under discussion include stone-chip-resistant windshield films for cars, buses, trucks, and air bladders for high-end cars, using resins developed by Lubrizol.
• Go-to-market across Garware's 90+ country channel — management received a good response at the SEMA show in the US and, if the initial phase works, may pursue further expansion (aspirational, no commitment).

Architectural Scale-Up and India PPF Headroom

• Architectural/window films now ~30% of sales, up from 10% at inception — roughly Rs.400 crore annualized as of Q2 FY 2026-2027; management expects the vertical to become a Rs.1,000 crore business (period unspecified) and hopes it reaches 50% of the window film business as it grows (period unspecified).
• India architectural team delivered 3x top-line and ~4-5x bottom-line growth over the last 3 years — film is positioned against glass: 20-30% less expensive, 99.9% UV protection vs 70% for glass, 20-30% higher heat rejection, plus a safety benefit (glass does not shatter).
• India PPF penetration at ~3% of cars sold vs 0.1% in 2020 — industry context cited by management: USA and China are closing towards 20%; Garware holds ~60% of the Indian PPF market with the rest going to imports, and is the only manufacturer with such backward integration.
• Anti-dumping duty on low-priced Chinese imports not yet applied — management applied for the duty; it was approved by the Ministry of Commerce but the Finance Ministry did not apply it; the company is taking necessary steps to make it happen.
• D2C/home solutions revenue roadmap: Rs.50 crore in FY 2027-2028 (year one) — followed by Rs.100 crore (FY 2028-2029) and Rs.200 crore (FY 2029-2030); management clarified the Rs.200 crore goal is a three-year target, not a one-year target; D2C can add ~10-15% margin on top of the ~40% B2B margins of top architectural products (period unspecified).
• 14 studios opened in H1 FY 2026-2027 — Garware Home Solution network expanded from 9 in Q1 FY 2026-2027 to 14, with 12 more planned in Q3 FY 2026-2027 (Delhi NCR and Mumbai) and a long-term target of 50 studios by December 2027; internationally, 2 additional US application studios took the network to 14, plus 4 global distributors added in Q2.
• Customer concentration: one customer accounts for ~30% of revenue (Q2 FY 2026-2027) — long-term agreements in place, film approved by a leading US EV car maker (adhesive rated for a minimum 15 years); management is not concerned about attrition as that customer is growing.

Limited Crude Correlation, But Pass-Through Risk

• Low crude correlation for ~75% of the business — 10-12% for sun control films and 5-7% for PPF; value addition via adhesives, nanoparticles, coatings and liners caps maximum correlation at ~15%; IPD (~25% of revenue) operates on direct two-way cost pass-through, though not always fully.
• Crude at $60 scenario: Q2 FY 2026-2027 revenue would have been ~Rs.650-660 crore — vs the ~Rs.700 crore base cited by the analyst, with only Rs.40-50 crore of revenue affected, since per management only ~25% of the business is directly crude-linked.
• Operating with crude at $100-110/bbl (Q2 FY 2026-2027 context) — price revisions happen quarterly or half-yearly, not monthly; price increases were implemented a couple of months prior (FY 2026-2027) when crude crossed $100+, and management stated it will have to ask for price decreases if crude falls further.
• Management cited market estimations that crude could realistically fall to $50-60 over the next 3-5 years — "crude could realistically fall to $50-60 over the next 3-5 years" as EV adoption and alternative fuels reduce demand, framed as a potential long-term benefit; in a $55-60 scenario, packaging, transportation, packing, dye and chemical costs would all fall.
• Raw material constitutes ~45-50% of cost currently (FY 2026-2027) — management cited that during COVID, even with crude at $40-45, selling prices did not decline proportionately, as the basis for its limited crude-sensitivity estimate.
• Inventory at 58-60 days (Q2 FY 2026-2027), raised intentionally — raw material buffer built to absorb 2-3 months of supply disruption amid geopolitical tensions; export inventory days for Europe/USA customers rose 15-25 days (~20 days overall at the export level); management is comfortable adding 10 more days if needed.

IPD Drag, MPCB Penalty and Pricing Catch-Up

• IPD contributes ~25% of revenue but only ~10-12% of margins (current mix) — management said even if IPD dips a little, overall company margins won't be much affected; commodity packaging in India is an oversupplied, supply-demand-driven market, and the company is not a major player there; no specific IPD growth guidance was given for FY 2026-2027 or the medium term.
• Rs.25 lakh MPCB penalty — an old boiler required modification as directed by MPCB; during the modification the boiler was run for trials despite being told not to (attributed by management to miscommunication); the company accepted the lapse and the boiler modification has been completed.
• ~Rs.31 crore tariff reversal received till date (as of Q2 FY 2026-2027) — ~Rs.20 crore refunded to customers and Rs.11 crore retained in the books; another ~Rs.30 crore refund expected in Q3 FY 2026-2027 (the final tranche), with roughly Rs.16 crore to the books and Rs.14 crore refunded; routed through the subsidiary as per local laws there, reversed from sales and adjusted into COGS, not recognized as revenue.
• Global pricing catch-up over the last 3-4 years — prices moved from 30-40% to 85-120% of global (primarily American/European, not Chinese/Korean import) peers; certain products are priced 10-20% higher than American players; the architectural portfolio spans ~100 products across five categories.
• Revenue outlook: Rs.3,000-3,500 crore run-rate over the next 2-3 years (by ~FY 2028-2029 to FY 2029-2030) — with the ~80% exports / 20% domestic mix broadly maintained and 25-30% CAGR growth targeted on both exports and domestic; management also reiterated its guidance of 22,500 plus for FY 2026-2027 and expects much stronger growth in FY 2027-2028 onwards.
• US sun control outlook: minimum 20% growth targeted for each segment and 35-40% for the architecture segment (period unspecified) — with current performance in line with these targets; management does not report a separate volume breakup (industrial in kgs, consumer in square feet), so the revenue split serves as the volume proxy.
• New center of excellence with 6 hires, led by talent holding 60+ international patents (as of Q2 FY 2026-2027) — supports PDLC switchable privacy film capabilities for automotive, commercial and architectural applications; car care launches included Ultra Series window film kits, digital e-warranty and no-cost EMI in partnership with Pine Labs.