Manorama Industries Ltd Q3 FY2026 Concall Summary

Key Takeaways

• Guidance raised, 73% YoY revenue surge: Q3 revenue hit INR 363 crores, pushing 9M revenue to INR 975 crores (81% YoY) and prompting management to lift the FY26 revenue target from INR 1,150 crores to INR 1,300 crores.
• INR 460 crore capex cycle begins: Four new projects, including a 75,000 MT CBA facility and a Burkina Faso processing factory, will be built over 2-3 years, funded primarily by internal accruals, with all capacities targeted to commence by FY28.
• Volume, not price, is driving the story: Roughly 65% of the 73% YoY 9M revenue growth came from volume, fueled by utilization of the 25,000-ton capacity added last year, with debottlenecking set to add another 30% throughput.
• Margins are range-bound but defended: Gross margin dipped to 44.3% on freight and byproduct mix, but management insists the 25-27% EBITDA margin range is sustainable and will improve over the medium term through operating leverage and a richer value-added product mix.
• What to watch next quarter: Whether the upgraded 12,000 MTPA facility delivers volume from Q1 as promised, the pace of capex deployment against the INR 70-80 crore FY26 target, and any firming of the "on and above 30%" FY27 revenue growth signal.

Topline Growth & Volume Engine

• Volume-led expansion: Of the 73% YoY revenue growth in the first nine months, approximately 65% came from volume, with the rest from inflation and pricing, driven by utilization of the 25,000-ton capacity commissioned last year.
• Capacity utilization headroom: Combined plant utilization sits at roughly 85%, and debottlenecking is increasing throughput by roughly 30%, providing growth room for the next two years before the new capex cycle kicks in.
• Value-added mix shift: Value-added products (stearin and CBE) now contribute roughly 75% of sales, with a stated intent to take that share to 85-90% and eventually 90-95% of the business.
• Pricing model stability: Despite cocoa butter prices swinging between \$25,000 and \$30,000, the company maintained sustainable prices through a cost-plus-margin model, and management stresses that CBE is a formulation-driven, solution-oriented business, not a commodity play.
• FY27 growth signal: Management initially indicated revenue growth "on and above 30%" for the coming year, then walked it back to "we will update you on that," leaving the number as a soft signal rather than formal guidance.

Ekta Soni: "We are manufacturers of cocoa butter equivalent, which is a more technology and formulation-driven business, not a commodity business. And hence, we are like more solution-oriented rather than a commodity-linked business."

The INR 460 Crore Capex Cycle

• Four-project buildout: The INR 460 crore plan, to be deployed over 2-3 years, covers a 75,000 MT cocoa butter alternatives facility, a 75,000 MT fractionation facility for shea/palm/mango/exotic seeds including ESOS, a 90,000 MT refinery, and a 90,000 MT Burkina Faso processing factory.
• Phased commissioning: One or two capacities are expected to be ready in the next 1-1.5 years, with all four commencing production approximately by FY28; land has been identified in Burkina Faso and equipment ordering is imminent.
• New products, not just more capacity: The solvent fractionation plant and CBE plant are entirely new capacities for new products, not an expansion of existing CBE production; the CBE facility requires the CBA facility, fractionation, and refinery but not selling and extraction.
• Funding posture: The company is primarily relying on internal cash accruals, with INR 52-odd crores already spent; external financing (debt or equity) will be considered selectively only if necessary, with no immediate plans.
• Asset efficiency expectation: Management expects asset turnover of more than 5x on the forward integration investments, and the capex is projected to suffice for five years of growth.
• Working capital for new projects: The forward integration projects carry a working capital cycle of only 1-2 months because raw materials are different and not linked to the current shea nut procurement cycle.

Ekta Soni: "We are primarily relying on our internal cash accruals, which are very strong and sufficient enough to support our planned projects over the next 2 to 3 years."

Margin Dynamics

• Gross margin fluctuation explained: Gross margin fell to 44.3% (per an analyst's math) from 52.8% in the previous quarter; management attributes this to the range-bound nature of 45-50%, driven by freight costs and byproduct realization, and states it does not impact EBITDA or PAT margins.
• EBITDA margin sustainability: The current 25-27% EBITDA margin range is considered sustainable, with a trajectory to improve over the medium and long term through multi-level strategies including operating leverage, richer product mix, and economic leverage from the new capex line commissioned in July 2024.
• Employee expense drop: A 23% decline in employee expense reflects the completion of an ESOP grant to employees, with no further provision required, providing a one-time tailwind.
• Other income spike: A sharp jump in Q3 other income came from forex gains on imports of shea nuts and other butters, reflecting the difference between the amount paid and the value when goods reached India, a non-operating swing item.
• New project margins: Margins on the CBA and forward integration projects are expected to be good and similar to the current business model, possibly better, though management declined to give forward margin guidance, saying any improvement will be guided quarter-wise.

Ekta Soni: "It is a range bound because there are a lot of situations with respect to freight costs and our byproduct realization. It doesn't impact our EBITDA margin or PAT margin that way."

Raw Material Sourcing & Regulatory Edge

• EU deforestation rules do not apply: The regulation targets cocoa beans as a farm/crop product; Manorama's raw materials are forest waste products collected from deep forests in India and West Africa, trees are not cut, and the company therefore sees no impact.
• Backward integration in West Africa: The 90,000 MT Burkina Faso processing factory is a backward integration play that deepens the company's sourcing network in shea-producing regions, reinforcing what management calls a defensible competitive moat.
• ESOS process adds flexibility: The enzymatic stearin-oleic-stearic process converts soft fractions like olein into hard fraction, which is blended with HPMF to become a CBE component, diversifying the raw material base and reducing dependence on any single input stream.

Ekta Soni: "It is not a farm product or a crop product, which we are buying. So -and we are not cutting trees and buying our thing. It's a forest wasted products what we are buying from the deepest forest of India and West Africa."

Partnerships & Geographic Expansion

• Dekel partnership ramp-up: Revenue contribution from the Dekel partnership in Latin America was minor in Q3 as the ramp-up has just begun; management highlighted the strategic advantage of local presence in the world's biggest consumption region to cater to all customers, not just the top 5-6 global accounts.
• No revenue roadmap provided: When asked for an expected revenue contribution from the Dekel partnership in FY27, management did not provide a roadmap, discussing only the general advantages of geographical presence.
• Demand visibility for new capacity: Management asserts there is a huge demand-supply gap in the industry for these niche, formulated, solution-based products, and the company has expanded more than 10 times in the past, providing confidence in filling the new capacities.

Ashish Saraf: "Our backward integrated model, high-tech R&D, research and development with cutting-edge technology and deep sourcing network and the confidence of our hundreds of customers, create a defensible competitive moat for Manorama."

Working Capital & Balance Sheet

• Working capital cycle improvement: The cycle reduced from H1 levels of 90 days to the current 120 days; the year-end balance sheet figure of roughly 500 days appears high because inventory is procured for 20 days for the whole year and then gradually reduces, so the average is around 150 days.
• Target going forward: Management targets a 90-100 day working capital cycle after new capacity comes online, a reduction of roughly 10-20 days from current levels.
• Growth visibility runway: Existing capacities support growth for the next one-odd year, debottlenecking extends that to roughly two years, new capex supports the next 2-3 years, and the overall plan provides visibility for 4-5 years.

Guidance & Commitments

Key Metrics