Concall notes:
- Next quarter to show true potential of newly invested capex. With new capex we’ll have twice the capacity of what we used to have
- Growth possible for old strategy of operating in niche areas where little or no competition?: Haven’t come close to exhaustion of this model.So no plan to change.
- Further expansion plan: We’ll tell later at appropriate time. Lets digest the current investment first.
- With new Operating cash flow coming : debt reduction + new investment like energy recovery.
- Boron Business: Positive comment. Improvement in supply. Expect to have better boron business in coming months. debottlenecking ahead.
- New products launched: These are introductory products, Speciality chem in nature. 50-100 cr market potential.
- Margin: Able to manage it. By passing on price. Rolling contract for spec chem quarterly or 6 month. Absolute number is okay(it’s like raw material cost was 100 and product cost was 120, now both increased by 20, it will causes the margin to shrink but the actual profit will be same).
- 98 cr outflow due to capex in cash flow statement of fy22+CWIP of 65 cr in balance sheet of fy22: Cost over run due to giving old value in presentations + some other projects like (fire hydrant system+zero liquid discharge facility+safety+environmental)
- Working Capital( Negative this year): Taking credit from suppliers. Good demand for products so debtors day also under control.
- peak debt (working capital+long term): It will grow. 100 cr long term debt. WC difficult to say depends on raw material price.
- Jewan Patwa: 200 cr capex(98cr in fy22 cash flow statement+47 cr fy21 cash flow statement+65 cwip in fy22 balance sheet): same reason as stated earlier.
- Long term contracts are for how long: perpetual contract as long as customers are satisfied we renew it. no intension to make it monthly. it will increase complexity. raw material fluctuations will dampen out.
- Our customers surely have other supplier also. But we are the significant supplier.
- Sulphur price increased hugely: Passed on some price for H2SO4. But can’t control price pass on. since not in our control. However we get some premium for our reliability.
- Backward integrated for spec chem.how much cost benefit: It depends on product and time to time. Safety + supply chain advantage.
- Bulk chem capacity: is it enough for downstream spec chem?: for next several year will have enough.
- Intermediate Plant at Dahej: It has single product. one customer gets 50% of the production and rest to multiple customers. long term contract with customer getting 50% of production.
- spec chem volume growth in fy22: 10% growth. could have been better if logistics was there for foreign customers. came from top 3 products.
- new capex coming live in q1: Market visibility is there. Some good impact in Q2. ramp up later.
- new H2So4 plant at dahej is not running in full utilisation. q2 it will be running at better utilisation. as we commission the downstream products.
- Scenario with New products sulfone, thiol, amide: sulfone’s growth is good. thiol not happy however it’s growing. amide has become like mature product.
- Can we expect all the new capex to be fully utilised at fy23 end: like to do so. but depends on things like logistics. some products were going to foreign. market visibility is there for those products.
- Sulfone revenue and vol growth in fy22: it had good growt and still growing. doing debottlenecking.
- Growth in fy23 will come from boron+new plants. boron peak sales happened in 3 yrs back. now it’s down 20-25%. Boron raw material availability is improved.
- Other expenses has increased hugely this quarter: Due to logistics cost due to Container cost. Container rates increased more than 4 times. Situation has not improved. Logistics supply chain is across all the Imdustries.Most ships are stuck at china and us.
- 5 years later where do we see ourselves in terms of spec chem and bulk chemistry: Our usual revenue split used to be 1/3rd bulk rest spec chem. It will happen once we increase our spec chem capacity. normal spec chem is 2/3rd. now it’s 50:50. Difficult to say what will be 5yrs later.
- One dahej plant is mainly for export market.
- At Roha h2sp4 plant 90% capacity utilisation. dahej h2so4 plant it’s lower.
- if prices of raw material goes down it will look like fantastic margin. but that will not be sustainable just like today’s low margin.
- top 3 products contributed 2/3rd of revenue.
a. Temporary headwinds: RM cost impacting gross margins, logistics issue impacting foreign revenue, fuel cost
b. margins will improve with rm cost going down, logistics issue improving, fuel cost going down and most importantly increasing speciality chemicals. Revenue will increase as all the new plants fully ramp up. So with margin expansion + revenue increases profits can increase even faster with respect to present situation with multiple headwinds.
c. Management is not giving any forward looking statements regarding revenue of fy23. It will not be surprising if they deliver good growth without promising anything.
Disclosure: Invested