My notes of yesterday’s AGM -
Management present – Kamalkant Dujodwala – Chairman, Pannkaj Dujodwala – MD, Akshay Dujodwala – Director (Chairman’s son), Sanjay Bhardwaj – CEO, Shriram Rajule – CFO
Key Highlights
- Raw Material – Specifically mentioned that company do not import crude gum or oleo resin. Company imports Gum Turpentine as well as alpha pinine. Both inputs needs to get distillated as a first step ( To convert GT into alpha pinine or to improve quality of alpha pinine, since different countries have different % of alpha pinine concentration)
- Capacity – Bit of contradicting responses. First confirmed stated 550MT/month capacity of Camphor. Current utilization @90%. When asked about how to grow future revenues, response was they have overall approval from MOEF to produce variety of products from 1400-4000 tons/month. So they have flexibility. 20 Cr Capex done in FY18-19 would also add some capacity by efficiency improvement.
- DRT tieup – Long product approval cycle (2 years), in progress, expect approval in 6-9 months time. No sale till now due to DRT. Not a game changer as future revenue due to synthetic raisins would not be very high as a % of overall sales. I see it more as a market recognition, technical help
- B2C business – Miniscule revenue as of now (single digit %). Mainly in Modern trade. Will be present in 700 stores in India after Reliance deal. Already present in D Mart, Hypercity, Spencers. (Year back, they were present in around 100 stores) General trade and E Commerce contribution to sale is very small. More focus on Mangalam brand of Camphor for Puja. Campure is very very small, brings more excitement and visibility. More focus on B2B2C (sales through platforms like Amazon business, ShopX etc) for Campure. Will be doing some communication this year (read advt/promotion) to create pull. Total market for Camphor (for Puja) in India is 17,000 tons (mainly general trade) out of which around 15,500 tons would be unorganized.
- Customers – Main customers are Tableters (around 2000 in India) to whom Company sells camphor powder. Highly fragmented customer base. Top 5 customers may be contributing below 15% of total sales. Need to protect tableters business while deciding retail pricing policy.
- Employees – Total employees – 190, trying to hire 20-25 focused on QA for GMP certification.
- Capex – FY18-19 Capex of @20 Cr was spent mainly revamping old plant, improving quality of camphor to international pharma grade purity, to enable GMP certification for export , to improve productivity by reducing losses etc. No clear answer for future capex
- Sales – FY 18-19 increased revenue purely on account of increased market prices of camphor. No volume increase during the year. Camphor prices are in direct relation with gum turpentine prices, maybe with a lag. (Gone up more than double in last 3 years) The ratio of camphor price to GT price may change from time to time.
- Margins – To the question about whether 30% EBITDA/12%PAT is sustainable for such commodity product, management response was margin were always there in Camphor industry. Company could not deliver margins as they were more focused on synthetic resins which is low margin businesses. In last few years, company pruned down offering and focused on good quality/high margin products. Plant revamp provide more flexibility in terms of products. Level playing field with China in terms of camphor pricing. China finds more remunerative to export to rest of the world than to India.
- Working Capital - Payment terms - B2B - 0-30 days. B2C terms – 30-60 days , Inventory – Mostly from B2B as need to hold inventory for customers, in warehouses/ports etc. B2C – No material waiting for dispatch, so hardly any inventory.
- Investor outreach – Improved AR for this year was the first step in this direction. Planning to start with investor presentations by end of this year. No plans for concalls as of now. Requested Management to improve their BSE reporting like “launch of new product” or " new plant opening" or “capacity additions” etc. Akshay mentioned that he will look into it.
In general, I think DRT/B2C is much longer term story than imagined. Management was open to share their thoughts at the same time conservative (rightfully) to protect some information due to competitive reasons. I believe Camphor price is the key watchout. It is holding steady as of now but if due to crude price going up, Gum rosin demand and hence production start going up, which in turn could impact gum turpentine prices negatively. (although chairman mentioned that this will take 1-2- years as pine tapping schedules can not be changed in short timespan)
I may have misinterpreted what was said and discussed during the meeting. So please feel free to modify if you have attended this meeting.
Discl - Holding minor position at a loss, so interested in company. This is not a buy/sell recommendation.