Sharda came out with reasonable results (3.3% sales growth and 12% EPS growth) which look especially better if one looks how other the results of other agchem cos have panned out. In H1FY23, they were impacted by foreign currency losses which reversed to a certain extent contributing to improvement in margins in H2FY23. Management feels confident of achieving 15-20% growth in FY24. Concall notes below.
FY23Q4
- For FY23, volume (-)4.6%, price & product mix change (+)15%, currency exchange (+)2.5%
- For Q4, volume (-)3%, price & product mix change (+)2%, currency exchange (+)4.3%
- Gross margins improved due to higher European sales
- FY24 growth: 15-18% with 18-20% EBITDA margins and 30% gross margins
- Gross margin breakup: EU (36%), NAFTA (24.5%), LATAM (26.5%), ROW (22%)
- FY23 capex: 355 cr. (~400 cr. in FY24)
- Forex losses of 58 cr. forex losses in FY23 (82 cr. losses in H1FY23 offset by 24 cr. gains in H2FY23)
- NAFTA region is facing hardships which has resulted in inventory challenges which has also resulted in higher working capital. Higher inventory for Sharda is largely in NAFTA where margins may suffer. In other markets, Sharda’s inventory is low and they should benefit from lower technical prices
- Reduction in PPE (from 14.4 cr. in FY22 to 5 cr. in FY23) is due to depreciation of leased assets
- Chinese prices have seen a lot of correction in last quarter and this will have positive impact on Sharda’s business (volume + margin wise)
- Other expenses increase is due to general inflation in Europe
- Better performance vs peers is due to more nimble business model where they don’t have fixed manufacturing costs
- In newer products, competition is very low and margins are higher for Sharda
- Cost of registrations have increased by 20-100% in past 3-4 years
- Don’t drop prices more than 10% vs innovator prices
Disclosure: Invested (position size here, no transactions in last-30 day)