Release Date: July 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Meghmani Organics Ltd (BOM:543331, Financial) reported a significant increase in EBITDA, up by 194% YoY and 40% QoQ.
- The company successfully launched 8 new products in the Crop Nutrition segment, enhancing its product portfolio.
- The Titanium Dioxide plant has stabilized and is running continuously, with product quality receiving approval from new customers.
- The Crop Protection segment saw a 20% YoY increase in production, with capacity utilization at 73%.
- The company received the Responsible Care Accreditation for its Crop Protection segment and a committed badge from EcoVadis for sustainability efforts.
Negative Points
- Revenue from operations remained flat at INR411 crore, indicating no growth in top-line performance.
- Profitability was impacted by lower product price realization across markets.
- The Pigment segment's capacity utilization was low at 45%, affecting overall efficiency.
- The company has a high debt level, which increased from INR300 crores in FY20 to INR850 crores in FY24.
- The Crop Protection segment experienced a drastic price reduction of about 25% YoY, impacting revenue.
Q & A Highlights
Q: After a prolonged sluggishness, the demand seems to be improving from Q1 onwards. What kind of improvement are we seeing? Is it product-specific or market-specific? And how sustainable is this improvement?
A: The demand recovery is broad-based across various markets, not just specific to one or two. This improvement is sustainable as inventory levels have normalized and interest rates have stabilized, leading to a gradual increase in demand.
Q: With the upcoming monsoon in Brazil, how do you see the market behaving? Are we done with inventory destocking in Brazil?
A: We are receiving positive feedback from the Brazil market. Inventory levels have become reasonable, and with good rain expectations, we anticipate strong demand going forward.
Q: How are the product prices currently? Is there any movement on the uptick?
A: Prices have been flat at the bottom-most level. However, with demand picking up, there is a good chance that prices will increase as the current price levels are not sustainable for the industry.
Q: How do you see the capacity utilization for the Pigment segment panning out for the next few quarters?
A: We expect a slight increase in capacity utilization but not drastically. We aim to maintain current levels to achieve better price realization and focus on profitability rather than volume.
Q: What are the new products being introduced in the agrochemical space?
A: We have introduced several new products, including cyfluthrin, Betacyfuthrin, Flubendiamide, Pymetrozine, and Ethiprole. These products are high-value with better profitability and will contribute to future growth.
Q: Can you elaborate on the CapEx of INR1,140 crores spread over three projects and the expected revenue at full utilization?
A: The Crop Protection segment's CapEx of INR400 crore can generate INR800 crore revenue. The Crop Nutrition segment's INR150 crore CapEx can generate INR1,000 crore revenue at full capacity. The Titanium Dioxide segment's INR600 crore CapEx can generate INR275-300 crore revenue.
Q: What are your debt reduction plans?
A: We plan to repay close to INR173 crore of loans this financial year and a similar amount next year, aiming to substantially reduce debt levels over the next two years.
Q: What is the capacity utilization for the Titanium Dioxide segment in Q1, and what is the breakeven point?
A: The Titanium Dioxide segment ran at about 35% capacity in Q1. We expect to reach 70% capacity utilization in the second half of FY25, which will be near the breakeven point.
Q: What kind of blended revenue and EBITDA margin should we expect for this and the next financial year?
A: We expect a 20% top-line growth this financial year and the next, with an average EBITDA margin of around 15%.
Q: Do you foresee any competition in Nano Urea from IFFCO?
A: We do not see competition from IFFCO as the market potential is tremendous. Both Meghmani and IFFCO can coexist and cater to the large market size for urea in India.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
