Release Date: February 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- India Pesticides Ltd (BOM:543311, Financial) reported a sequential growth of 19% in EBITDA for Q3 FY '24, with an EBITDA margin of 25%.
- The company achieved a net profit of INR 24 crores for Q3 FY '24, marking a sequential growth of 23% and a PAT margin of 16%.
- The company's advanced herbicide technical product received TEQ certification from the European Union, opening new export opportunities.
- India Pesticides Ltd entered into a 3-year contract with a prominent Japanese company to supply an intermediate, enhancing its global footprint.
- The company has a strong balance sheet with cash and cash equivalents of INR 153 crores at the end of Q3 FY '24, and plans to fuel its CapEx with internal accruals.
Negative Points
- Total income for Q3 FY '24 was INR 155 crores, a decline from INR 222 crores in Q3 FY '23, primarily due to a drop in export sales.
- Export revenue faced challenges due to high channel inventory and destocking by MNCs, impacting overall performance.
- Domestic revenue also saw a significant decline, standing at INR 64 crores compared to INR 140 crores in the previous quarter.
- The volume for Q3 FY '24 declined by 30% compared to Q3 FY '23, indicating a substantial drop in sales volume.
- The international market environment remains challenging, with MNC customers hesitant to place large orders due to high inventory levels.
Q & A Highlights
Highlights from India Pesticides Ltd (BOM:543311) Q3 FY '24 Earnings Call
Q: You mentioned the environment being continuously challenging. What is your judgment on the prices of products and raw materials in the last 3-4 months? Have they stabilized?
A: The raw material prices have stabilized at a low level. Pricing varies by molecule; some have stabilized higher, while others have settled lower. Overall, there is no further fall in prices visible in the last 2-3 months. - Dheeraj Jain, CEO
Q: What is your view on the inventory and demand environment going ahead, especially from domestic and large MNC customers?
A: The international environment remains slightly confusing with MNCs hesitant to place large orders due to high stock levels. It may take another 1-2 quarters for things to stabilize. - Dheeraj Jain, CEO
Q: Can you provide more details on the gross margin improvements and the sustainable gross margin going forward?
A: The higher gross profit margin is due to a better product mix and converting one raw material on a job work basis, resulting in higher other expenses but reduced gross consumed. Future gross profit margins are expected to be in the range of 48% to 52%. - Satya Gupta, CFO
Q: Given the CapEx plans, how do you look at the top line for FY '25 and FY '26?
A: We expect a 15% to 20% increase in top line for FY '25 over this year, despite a decline in finished good prices. For FY '26, we anticipate continuing to grow at almost 20%. - Dheeraj Jain, CEO
Q: How do you see the domestic market formulation business? Are you planning to expand it?
A: The domestic market is relatively better than the international market. Our formulation business is on an increased path, and we plan to expand it during the coming season. - Dheeraj Jain, CEO
Q: Can you give some projections with respect to what happened on the volume side?
A: The volume for this quarter declined by 30% compared to Q3 FY '23. The reduction in turnover is predominantly due to volume decline, with prices remaining stable on a blended basis. - Satya Gupta, CFO
Q: How are your exports doing, especially with the competition from China?
A: China is putting up large plants for some popular products, but they are not very aggressive in our current product lines. The major issue is the slowdown in purchases by MNC customers due to high inventory costs. We expect normalization by next quarter. - Dheeraj Jain, CEO
Q: What is the status of the first block you are establishing, and what kind of products will it produce?
A: The first block under construction includes a formulation plant and an intermediate plant. The formulation plant will be commissioned first to fulfill domestic and export orders, followed by the intermediate plant in another 2-3 months. - Dheeraj Jain, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
