Release Date: February 20, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Mitsu Chem Plast Ltd (BOM:540078, Financial) reported a total income of INR 73.74 crore for Q3 FY '24, showcasing resilience despite cost pressures.
- The company achieved an EBITDA of INR 7.70 crores and a net profit of INR 3.18 crores, reflecting effective cost optimization and profitability improvement.
- Mitsu Chem Plast Ltd (BOM:540078) introduced MiEcoPET, a sustainable packaging solution using 30% to 50% less raw material and incorporating 30% to 60% recycled PET material.
- The company participated in international exhibitions like MEDICA Dusseldorf and Arab Health, leading to global inquiries and reinforcing its industry standing.
- Mitsu Chem Plast Ltd (BOM:540078) is raising funds via a rights issue to repay debt, fund working capital requirements, and expand its business, aiming to stay competitive and maintain its leadership position.
Negative Points
- Despite improvements, the operating margin of 10.23% still leaves room for further enhancement, with an internal target of 12% yet to be achieved.
- The company faces challenges in scaling up its new MiEcoPET product, as it requires extensive trials and approvals from potential clients.
- Mitsu Chem Plast Ltd (BOM:540078) has not yet ventured into direct exports, which could limit its growth potential in international markets.
- The company's working capital cycle increased to 80 days in Q3 due to early raw material arrivals, deviating from the usual 60-day cycle.
- The current debt stands at INR 97.54 crores, with a significant portion being short-term debt, which could impact financial flexibility.
Q & A Highlights
Q: What are your future growth strategies to improve operating margins from the current level of 10.23%?
A: Our internal target is to achieve a 12% operating margin. We are confident in reaching this goal through the introduction of high-margin products like MiEcoPET and other strategic initiatives. (Manish Dedhia, CFO, Joint Managing Director, Director)
Q: Can you provide more details on the new MiEcoPET containers and their target industries?
A: MiEcoPET containers are designed for the lube oil, edible oil, and FMCG industries. We have approached several companies in these sectors, and the product is currently under trial at their facilities. (Manish Dedhia, CFO, Joint Managing Director, Director)
Q: Are you planning to directly sell in the export market?
A: Currently, we do not directly sell in the export market, but we are planning to do so, especially with our hospital furniture products. We have received many inquiries and expect to announce export orders soon. (Manish Dedhia, CFO, Joint Managing Director, Director)
Q: What is the current contribution of hospital furniture to your revenue?
A: Hospital furniture contributes approximately 12% to our revenue. (Kashmira Dedhia, Vice President, Finance and Accounts)
Q: What is your fund deployment plan for the proposed rights issue?
A: The funds will be used for loan repayment, working capital requirements, and general corporate purposes, including potential capital expansion. (Kashmira Dedhia, Vice President, Finance and Accounts)
Q: How are raw material costs affected by oil price volatility?
A: Raw material costs are directly impacted by crude oil prices and demand-supply dynamics. We continuously monitor these factors to manage our pricing strategies. (Manish Dedhia, CFO, Joint Managing Director, Director)
Q: What is the current debt level and the plan for debt repayment with the rights issue?
A: Our current debt is INR 97.54 crores, with INR 36.8 crores as long-term debt and INR 60.74 crores as short-term debt. We plan to use INR 15 crores from the rights issue to repay debt. (Kashmira Dedhia, Vice President, Finance and Accounts)
Q: What are your sustainability initiatives and progress towards environmental goals?
A: We have launched MiEcoPET, which uses 40-50% less plastic and incorporates 30-40% recycled material. We are also working on other sustainability initiatives like using PCR materials in our products. (Manish Dedhia, CFO, Joint Managing Director, Director)
Q: Are there any regulatory challenges or compliance issues you are facing?
A: We are compliant with all government norms and do not face any regulatory challenges. (Manish Dedhia, CFO, Joint Managing Director, Director)
Q: How do you plan to scale up your business with existing customers?
A: We aim to grow both with existing and new customers. Our policy is not to depend too much on any single customer, and we continuously seek new clients while expanding business with current ones. (Manish Dedhia, CFO, Joint Managing Director, Director)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
