Sales growth revived in Q2, company is putting up capex in Sarigam and Saykha which should start contributing from FY24. Interestingly, they are doing exceptionally well in domestic formulations business which gives a good cashflow stream to invest in technical plants. Concall notes below
FY23Q2
- Guidance: Maintain sales growth guidance of 15-17% with 16-18% EBITDA margins. Exports were impacted due to China lockdown. Currently operating at 89-90% utilization
- Witnessed 35-37% increase in fuel costs and 20% increase in labor costs
- One of promoter family member resigned from board to reduce family representation on board as advised by investors
- Chinese contribution was 18% of H1FY23 sales (vs 22% earlier). Have lots of products registered in China and have started exporting a new intermediate to China
- China exports: bromine intermediate, insecticide intermediate, and pyrethroids
- China: Sell to companies that make formulations or to traders. Don’t sell directly to distributors (so B2B and not B2C)
- Make 13-14 products, out of which 7 are pyrethroids in which they are fully backward integrated making their own intermediates
Regulated markets
- US: FY22 revenues was 15 cr., expect 30 cr. in FY23 and 50 cr. in FY24
- Received 1 registration in Europe in Q2FY23
- Hoping to receive 2 registrations in USA by Q4FY23 (1 herbicide + 1 pyrethroid)
Domestic market - 60% contribution for them comes from Kharif and 40% from Rabi
- Launched 10-12 formulations
- Will potentially reach 400 cr. in formulation sales in FY23
- Formulation business: though gross margins are lower, its a fixed cost business where EBITDA margins increase due to larger volumes
- Currently present in 21 states and sell to 8000 dealer
Capex:
- Spent 41 cr. on Sarigam in H1FY23 and will spend 100 cr. more in H2FY23 and Phase I (5000 MPTA capacity) will commercialize in Q4FY23 and give 3x asset turns by FY25. Phase 2 should commercialize in Q3FY24
- Saykha unit expansion (technical herbicides plant) will be 150 cr. and will occur in FY24 and FY25. Expect 3-3.5x fixed asset turns and commercialization in Q1FY25
Disclosure: Invested (position size here, no transactions in last-30 days)