See the 1QFY23 conference call transcripts. Management talked up the company. Said last year’s problems were behind them. Pumped up the stock price to Rs2000 plus and then delivered a very bad set of numbers
4 Likes
Exactly!
The margin guidance was 16%-18% in the last concall. Need more clarity on this.
If someone plans to attend the next concall, please ask abt this (I’m sure everyone attending will ask this anyways 
)
I have not seen any Earning call for Q2 FY23 , I think they skipped it this time , does anyone have any Q2 call minutes ?
1 Like
Is anyone tracking this company? Very poor set of results yet again and no clarity from management on the sudden decline in performance
3 Likes
They have indicated in the investor ppt saying it (reduced revenues) was due to the reduced demand from the paint industry and not due to missing out of any customers.
I was going through the numbers to see if it was right to trim my holdings due to the poor set of numbers, deciding not to trim. good management team, solid moat, 10-15% compounder with great return ratios.
1 Like
What I hate about companies like Fairchem is the fact that they stop concalls as soon as results go bad. On a lighter note, their name has “Fair” but they are not fair to their investors…:- 
Investors need more explanations and clarifications (hand holding) when things go bad and not otherwise round…
Disclosure - sold at loss after last quarter fiasco. Happy to remain away from this stock
6 Likes
company will be switching it tocopherol capex plan with isoteraic acid.
isoteraic acid is only manufactured by 4-5 players in the whole world. very difficult to make, fairchem will be coming up with a capacity which is just 6% of the total market (lot of headroom to grow in future).
isoteraic acid is high margin, higher than current business.
Europe and the USA have come up with new regulations
whereby the seafaring vessels are supposed to use biodegradable lubricants in which the
isostearic acid is going to be the main ingredient. And there is no one in India making isostearic acid.
concall info
8 Likes
Source: Transcript Document
Summary: Isostearic capex completed, deliveries starting Jul-Sep qtr onwards, 90% export, Co targeting 5-6% marketshare of a product that is 50K-55K tonnes and $400M value (i.e. $20M = ~160Cr). Only 5-6 manufacturers, no dominant manufacturer, 2 in USA, 2 in Europe, none in China/Vietnam/India, market growing 5-6%, so Fairchem entry will not put pressure in market as of now, but pricing might be discounted due to new entry. Questions: 1) Will the Isostearic market demand grow upwards to current 5-6% growth? 2) Do current players have capex plans?
7 Likes
Fairchem came out with a decent set of results, with sales growing by 45% and margins reviving to 13%. Management is very bullish on quick scaleup in isostearic acid which seems to be the near term growth driver, along with continued margin revival. Concall notes below.
FY24Q3
-
Sales volume increased by 2.64% and value decreased by 2.8% quarter-to-quarter
-
Process quantity was 15,277 MT (4.9% lower on Q-o-Q). 15% higher on 9MFY24 vs 9MFY23
-
Q3 Dimer acid: 2,000 tons, linoleic acid: 7,000 tons
-
9M Dimer acid: 6,000 tons, linoleic acid: 22,000 tons
-
Isostearic acid :
-
10 MT export shipment to EU in December, revenues not booked as they book revenue once customer receives shipment (CIF basis)
-
Overall capacity of 2000 MT and hope to reach full utilization in December 2024
-
Croda, Arizona have higher capacities
-
Will allow them to better compete with Chinese on dimer acid as isostearic acid scales
-
Differentiated product, required 5-6 years of development to manufacture because technology is not available off the shelf
-
-
Export : 10% of sales in Q3. Will not face delay due to Red sea crisis for US exports
-
Linoleic acid : China doesn’t compete because of high freight component
-
Overall capacity: 120,000 MTPA. 80,000 MTPA dedicated towards current products including isostearic acid and 40,000 MTPA are earmarked for new projects. Have adjoining land for expansion if required
-
Growth focus will not shift towards introducing higher value items than just processing more input material
Disclosure: Invested (position size here, bought shares in last-30 days)
5 Likes
Fairchem came with flattish results (6% sales growth, flat EPS), however the internals look very strong. They grew volumes by 13% in a tough year and are confident of double digit volume growth in FY25. Additionally, they are confident that isostearic acid will reach 100% utilization by September 2024 as they have more orders than capacity. Management is expecting 15-16% EBITDA margins by Q4FY25. Concall notes below
FY24Q4
-
Volume growth of 15% QoQ and value decline of ~8% (due to decrease in raw material and finished product prices**). Paint industry volume for them grew by 15%** (higher than industry level growth of 10%) due to increased penetration into existing and new customers
-
Process quantity was 19,000 MT in Q4 and 65,000 MT in FY24 (13% growth in FY24). Expect ~72,000 MT in FY25
-
Linoleic acid: 46% (~286 cr.), dimer acid: 27% (~168 cr.). Not seeing any Chinese dumping in dimer acid (66-70% market share in India, rest is imports)
-
Export: 5% of Q4 sales
-
Isostearic acid:
-
Currently depressing EBITDA margins due to initial losses incurred as loss of material and high utility cost while stabilizing production process and reach desired quality level
-
Did full container load exports to Europe in March and have secured more export orders from existing and new customers (in Europe, USA)
-
Expect 100% capacity utilization by September 2024 and will potentially reach 15% EBITDA margins by Q4FY25
-
Have more orders than what they can fulfill
-
-
The new product they are working on with new raw material is still in R&D and they don’t expect commercialization in FY25. It’s a biodegradable product used in lubricants and other high value applications
Disclosure: Invested (position size here, no transactions in last-30 days)
6 Likes
Hi
Thanks for a conscise summary of concall.
Few things i am trying to understand
- Company doesnt seem to have any pricing power. It seems most of its product are commodity in nature and customers are guiding the terms.(both product price and offtake.
- Company says isostearic acid is high value items. However it also says sales will not be increasing due to this product. How can a product achieve more than 15/18 % ebitda (existing 11%)on same raw material and same sales price?
Please share if you have an understanding for anove points.
Thanks in advance.
Disclosure:-under watchlist . Studying for potential investment. My views are not to be considered neutral.
1 Like