Huhtamaki delayed solar power timeline, revised growth story
Management pushed renewable energy project to Q3 without explanation, and changed its explanation for Q2's 23% sales growth: from normal demand to crisis-driven inventory buildup expected to normalize.
What's new
- Q2 sales grew 23.1% YoY to Rs 723 cr, with EBITDA margin at 10.5% versus 8.3%.
- Growth was broad-based: volume, price, and mix each contributed roughly one-third.
- High single-digit volume growth came from existing customers, not new wins.
- Solar captive generation project postponed to Q3 from Q2; no reason given.
Themes from the call
Demand
Domestic and export demand grew broadly similarly; home care and beverage demand rose. High single-digit volume growth driven by existing customers, not new accounts.
Margins
EBITDA margin improved to 10.5% on pricing pass-through and product mix; raw-material pressure largely recovered. Management refused to guide on next-quarter margins.
Credibility
Two inconsistencies: renewable project timeline shift and changed explanation for Q2 growth quality. These undermine confidence in management's visibility and guidance.
Guidance watch
- Solar captive generation to come online in Q3, supplying 50% of Khopoli plant power.
- Productivity improvements to provide enough capacity for volume growth over the next couple of years.
- Management would be satisfied growing at market rate of 3-5% in selective profitable categories.
- Q3 expected to provide clearer visibility on customer inventory normalization.
Risk flags
- Renewable energy project delayed by a quarter without explanation raises execution risk.
- Q2 growth partly driven by crisis-led customer inventory buildup; some reversal expected in Q3, but management declined to quantify the impact.
- Management refused to guide on EBITDA margin or revenue run-rate, limiting forward visibility.
Key quotes
-
"We do not expect 23.0% growth every quarter because there are many other factors. If we grow at the same rate as the market, that would be a happy place for me."
— Kamal Saneja, CEO -
"We have a solar captive generation pipeline coming online in Q3, which will supply almost 50% of power for our Khopoli plants."
— Kamal Saneja, CEO (Jul 2026 call) -
"We hope that we have the energy generation from this project in the second quarter of this year."
— Management (Feb 2026 call)
The brief
Huhtamaki India delivered a strong Q2: sales up 23%, EBITDA margin at 10.5% from 8.3%, high single-digit volume growth. The headline numbers are solid. But beneath them, management made two contradictory moves that investors should note. First, the renewable energy project that was supposed to generate power in Q2 is now scheduled for Q3. No explanation was given for the delay. Second, on the call management attributed part of Q2's sales tailwind to customer inventory buildup triggered by the Middle East crisis: a reversal from the May call, when it said the crisis-led volume surge was stabilizing and underlying demand was normal. That shift matters because it changes the quality of reported growth. If some of Q2's strength was inventory rather than end-demand, the run-rate is lower than it appears. Management expects clearer visibility in Q3 as customers destock, but it declined to quantify the reversal. The company is profitable, debt-free, and investing in productivity. But on guidance credibility and growth sustainability, this quarter leaves more questions than answers.
Huhtamaki's renewable delay and growth-quality revision raise questions about visibility and guidance reliability.