With the high amount of cash that the company is generating, what could be potential areas which the company could target for potential acquisitions (backward integration, forward integration or perhaps new chemistry altogether - another chemical which they can sell along with TiO2 for paints? Biopesticides, seeds, branded agro formulation, etc?
TiO2 downward price trends continues. Plus side is raw material (sulphur pricess which MOL follows and is more cost effective) is also down.
Per the concall, they need 2 mths to stabilize plant. How quickly will prices revive is the question? Note that article says that Chemours (a large player) declined production and APAC was exporting (reference China is the largest manufacturer).
MOL might also have to lower its prices to gain market share and introduce new product vis-a-vis imported product from China. If anyone has insights on its cost of production (is its technology superior than China and thereby being cost down?), pls share. Concalls do not have any mention except that MOL is not backward integrated in TiO2 which tells me that cost can be higher in comparison to existing players who are
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How you are sure that meghmani will deliver on the quality front of TiO2? In my opinion, demand and supply scenario will be second. First and foremost is about quality of TiO2.
Disclosure: Invested before demerger @ 60 rupees and buyed in small amount recently.
Recent management interview (link)
31.03.2023 ET Swadesh
- Pigment: Prices have stabilized in Q4 (vs Q3), utilization has increased from 30% to 50%. Also seeing improvement in end product prices
- Agrichemical margins will be maintained as raw material costs have softened. Currently global demand is facing contraction (operating at 75-80% utilization due to diversified global presence)
- Newly commissioned agchem MPP plant will be ramped to 50% in FY24, evaluating next phase of expansion and will be announced depending on demand recovery in global markets
- March 2024: will commercialize nano urea (hoping for 50% utilization in first year)
- Projecting 15-20% growth run rate in next 3 years
Disclosure: Not invested (no transactions in last-30 days)
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FY23Q4 concall notes
- Pigment: Low demand + fall in realizations. Expect growth in pigment division in FY24 over FY23
- TiO2 plant with installed capacity of 16,500 MTPA is under trail run and expected to be stabilized in Q1FY24
- Muted demand in agchem sector continues in Q1FY24, RM prices have come down significantly. Hoping for revival in Q2FY24
- Agchem technical prices have come down 40-50%, but RM prices and logistic costs have also reduced significantly. Similar situation happened in 2008 period after China Olympics
2008 background
- Sales growth was muted in FY10 and revived in FY11, but margins only started reviving in FY12. So sales was flat for a year but it took 2-3 years for revival in profitability
- Volume growth in agchem sector will not translate into revenue growth for FY24. Hoping to see positives in Q2FY24
- MTM gain on receivables (76 cr.) shown in other income, MTM loss on foreign currency borrowing (-46 cr.) shown in finance cost
- Commenced manufacturing of Lambdacyhalothrin, Flubendamide and Beta Cyfluthrin, Cyfluthrin and Spiromesifen from the Multipurpose plant at Dahej catering to domestic and export markets. Will ramp up to 50% in first year, 65% in second year and 75% in third year of operations.
- Expect 650-700 cr. of revenues from this facility (no new incremental capex is required to achieve this)
- TiO2 prices have started improving from 160 to 190+, ilmenite prices have gone down from 44-45 to 28
- TiO2: Will manufacture using Sulphate process and will have captive power plant. Not targeting medical grade TiO2. In good years, it can do 20%+ margins and should do 15-18% in average years
- Average cost of loans is around 3.5% (due to foreign currency loans)
- Current production of all agchem cos are lower to minimize high cost inventory
- $100mn agchem contract has already commenced, it will be equally distributed in 5-years, have all the required registrations
- Demerger will happen in 2-3 years once pigment division is normalized
- Fire: Bringing in more automation to reduce such instances, management is seriously working on this to bring down such fire instances
Disclosure: Not invested (no transactions in last-30 days)
14 Likes
@harsh.beria93 Seeing lots of institutional interest showing up in this counter. Also slowly seeing volume build ups. Can we expect green shoots to emerge after Q2? or More visible growth can only be expected after Q4FY24?
Disclosure: Not having any exposure to this counter. Evaluating different value pick from Agro Chemicals due to tailwinds.
Happy Investing,
Karthik
FY24Q2
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Agchem: lower realization, high channel inventory across the market. Prices have definitely bottomed out
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Nano Urea and Titanium Dioxide will start contributing in FY25
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TiO2: should achieve 12000 tonnes (75-80% utilization) and 225-250 cr. Margins are under pressure recently
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Nano urea has not seen good adoption from farmers. Expect 17-19% margins
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2,4-D price: $1.9-2; Bifenthrin price: $20; Lambda: $15-16
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Capex
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TiO2: Stabilization will finish in Q3, have spent 275 cr.
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Captive power plant: have spent 100 cr. with 10-12 cr. more to be spent
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Nano urea: Will commission in March 2024. Out of planned 150 cr., will invest 75 cr. by March 2024
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Phase 2 of agchem MPP expansion has been put on hold
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Maintenance capex is 10-15 cr.
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Receivables have increased from 90-100 to 100-110 days
Disclosure: Not invested (no transactions in last-30 days)
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Promoter buying in may 2023 and Feb 2023. Why is the promoter holding decreasing then?
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There is long history of fires, corporate misgovernance issues and I have put all such stocks in never buy category. One can still make money but all such are type of gamble stocks…
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Anyone still tracking this? Promoters have repeatedly pointed out that the prices have bottomed out and that they see better days ahead.