Punjab Chemicals & Crop Protection Limited (PCCPL) A Clear Runway Ahead!

aren’t hydrogen hydrate and hydrazine hydrate different products? I am not from science background, so I am clueless.

shiv kumar

Any reasons for recent correction, does market know something which retail investors are missing?


SHALIL-SHASHIKUMAR-SHROFF-MD-@-Punjab-Chemicals.pdf (1.7 MB)


I believe it’s due to technical reason. most chemical companies are correcting after giving spectacular return in last bull market. Leaders of last bull market hardly give any return in short term like 1-1.5 years. Here is a weekly chart indicating it.

If eps growth is strong then this downward trend must be broken.


There is nothing called hydrogen hydride. It is hydrazine hydrate. It was a typo while creating transcript of the concall.

Punjab came up with very good sales growth of 33%, but margins were stressed due to RM inflation and higher power costs. Management remains confident of strong growth and are guiding for 1100-1150 cr. of sales in FY23, and 1500 cr. in FY24. My concall notes are below.


  • Headwinds in business environment, have adopted flexible approach in product pricing (to increase market share) and are focusing on new geographies such as South America
  • Margins: pricing pressure, product mix, carry over of high cost inventory from earlier periods (mainly hydrazine hydrate). Energy, fuel (rice husk; gone up) and freight costs impact other expense. Will be able to pass on cost pressures by Q4 and revert to 14-15% EBITDA margin
  • Hydrazine hydrate prices have started tapering off
  • Power costs (60 cr. in FY22 vs 32/33 cr. for IPL/Bharat Rasayan): Products (herbicides) are more power intensive + due to farm law changes in last couple of years, availability of rice husk has become a challenge
  • Investing in renewing assets that are 30-40 years old (should have replacement capex of 30-40 cr. over 2-years)
  • Lalru: facing raw material problems resulting in lower production and delay in registration. Hope to come back to 70%+ utilization in Q3/Q4. Large part of CRAMS business comes from Lalru, and majority of expansion will also happen here
  • Derabassi: mature products, debottlenecking
  • Order book: has increased from 1500 cr. to 2500 cr.
  • Looking for a new site in Maharashtra or Gujarat and should finalize by end of FY23
  • Lot of customer visits happening from multiple geographies (Japan, Israel, etc.)
  • Phosphorus derivative: Faced pressure in this division due to pressure from Chinese suppliers. Have seen large margin drop, should see it come back to 16-18% next year
  • Have seen some slowdown in demand from domestic market
  • Agri segment has seen significant growth in South America
  • 15%+ volume growth. Maintain 1500cr. revenue by FY24
  • Thiocyclam: Full potential of this product has been delayed due to registration an should be realized in FY24
  • Singapore customer molecule (most likely prosulfocarb): Registration has been delayed and growth should come in FY24
  • Capex: 120-150 cr. over next 2 years
  • CRAMS: 65%; 40% from generic molecules + 25% from tech transfer of 2 molecules from Japanese customers + 1 more. Are either first or secondary supplier in CRAMS business. Have quarterly review on forex adjustements
  • FY23 sales will be 1100-1150 cr.
  • 60-65% CRAMS + 15% specialty chemicals + 15-20% intermediate & fine chemicals. On spot basis, sales are very low (maybe 5%)
  • 2 new products coming in agro + 1 in specialty chemical in FY24
  • Making intermediates for Israeli company specializing in fermentation space (most likely NextFerm Technologies). It’s a small high margin business

Disclosure: Invested (position size here, bought shares in last-30 days)


This product is sold by UPL in Srilankan Market (Looks in-license agreement from Nippon Kayaku )

Possible reasons for high power costs are due to very old equipment (30-40 years old and they are spending about 30-40 cr to upgrade)

Reasons for low Margins

  • Increase in RM costs (Hydrazine hydrate)
  • High Power Costs
  • To maintain the customer relationship unable to pass on the RM costs

Growth Guidance

  • FY23 Target of 1100 Crores (550 Crores of that is achieved in H1 FY23 , they should do another 550 in another two quarters of FY23)
  • FY 24 Target is 1500 crore
  • Aiming to achieve 14-15% EBIDTA
  • By end of FY23 few of the products will be approved in Brazil market
  • Lalru’s utilization (where most of the CRAMS stuff happens) is low at the moment, aiming to reach to 75% utilization
  • Beyond FY24 guidance will be announced soon (by Q3 or Q4 of FY23)
  • Focussing more on inhouse R&D to capture market share of molecules that are going to off patent in couple of years from now
  • Margins will be better in Q3 onwards (This is product that they are making exclusively Nippon Kayaku and one more product for a Singapore Customer - Syngenta? )
  • Enough land at Lalru (6 acres ) to address the growth beyond FY25
  • Also looking for a site in Gujrat / Maharashtra
  • Growth Capex is between 120-150 Cr (At Derabassi it is mostly debottlenecking )

Management View on Generic molecules


Punjab came with muted nos, with sales being flat YOY. Margins have started reviving but next quarter will also be soft. Management is guiding for resumption of growth starting Q1FY24 and a 30-35% jump in revenues in FY24. Concall notes below


  • Shifted guidance of 1500 cr. revenues to FY25 from FY24. Will probably see 30-35% growth in FY24 and there will be a shortfall in reaching 1500 cr. in FY24. Will get projections from customers in February
  • Gross margins impacted due to high cost inventory, pricing pressure from certain markets and higher energy prices. This will persist in Q4 which will be a flat quarter. Gross margins will revive in Q1FY24, if energy prices are still high then EBITDA margins can be under pressure
  • All existing contracts renewed, none of their products are in red category
  • Industry is into stock liquidation mode to reduce high cost inventory
  • CRAMS contracts over last 2-years have ramped up well, have started reaching volume projection for the Japanese customers. 1 molecule projection has been surpassed, one is in-line, and one is lagging due to registrations
  • Lalru: Expecting 1 product registration in early FY24 from Europe. Capacity utilization will increase significantly after that as there is a dedicated capacity
  • Building new chemistry capabilities in line with newer demand from CRAMS customers
  • Have commercialized 1 new product this year, 1 more product was supplied in small batches for registration purposes. Will start contributing in Q3/Q4FY24 and major contribution will flow in FY25
  • In most CRAMS relationships, have exclusive relationship. In few molecules, there is a second supplier
  • Have been able to develop local vendors for 3-4 intermediates in last few years
  • Export margins are higher than domestic
  • Volume has grown 8-10% in 9M FY23
  • Capex: Will spend 100-150 cr. in next 2-years

Disclosure: Invested (position size here, no transactions in last-30 days)