Summary of the key points from the Q3 and nine-month FY24 Earnings Conference Call of Vishnu Chemicals Limited:

• Financial Performance (Consolidated):

  • Total income for Q3 FY24 was 308 crores compared to 311 crores in Q2 FY24.
  • Consolidated EBITDA for Q3 FY24 was 45 crores compared to 49 crores in Q2 FY24.
  • Consolidated PAT for Q3 FY24 was 21 crores compared to 24 crores in Q2 FY24.

• Financial Performance (Standalone):

  • Total income for Q3 FY24 was 258 crores compared to 269 crores in Q2 FY24.
  • Gross margins increased from 42.3% in Q2 FY24 to 43.1% in Q3 FY24.
  • Standalone EBITDA for Q3 FY24 was 32 crores compared to 40 crores in Q2 FY24.
  • Standalone PAT for Q3 FY24 was 22 crores compared to 24 crores in Q2 FY24.

• Chromium Chemical Business:

  • Domestic market demonstrated robust demand, leading to a sales mix favoring domestic sales.
  • Focus on improving efficiencies resulted in a 10% reduction in average consumption of key raw materials compared to FY23.

• Barium Chemical Business:

  • Capacity utilization in barium chemistry was similar to that in Q2 FY24.
  • Upgradation of equipment and infrastructure in the newly acquired baryte beneficiation plant was completed, with stabilization expected in February.

• Strategic Initiatives:

  • Acquisition of a chrome ore beneficiation plant is progressing well, aiming to secure raw material supply chain.
  • Commissioned a new capacity for manufacturing precipitated barium sulphate, with good volumes sold during the quarter.

• Outlook:

  • CAPEX for FY25 will prioritize vertical or backward integration and volume expansion.
  • Expecting improved performance in the quarters to follow, especially with the stabilization of new projects.

• Gross Debt and Net Debt: As of December 31st, the gross debt on a consolidated level is around 320 crores, and the net debt is nearly 250 crores. The debt to equity ratio is 0.5x, expected to decrease to 0.45x by the end of the financial year.

• Employee Cost: The 10% quarter-on-quarter jump in employee cost on a consolidated basis to 15 crores in Q3 is mainly due to the one-time impact of annual bonuses rolled out across the company during this period every year.

• PBS Revenue Contribution: The revenue contribution from PBS (Precipitated Barium Sulfate) is currently less than 5% and is expected to increase from Q4 and into Q1FY25.

• Capacity Utilization: Barium carbonate is operating at 75% capacity, and barium sulfate at 55-60%. The aim is to increase barium sulfate operating levels to over 80% and barium carbonate to over 90% during FY25.

• Revenue Growth: The company expects Barium Chemicals capacity utilization to improve from Q4 onwards, aiming for 70% utilization level in the next financial year, which will increase profitability and revenue.

• Future Expansion: The company is looking at adding chromium metal to its portfolio, with commercial launch expected by FY26. There are also plans to expand chrome oxide green production at the Vishakhapatnam plant.

• Chrome Oxide Green: There are good enquiries for chrome oxide green, and the company is considering adding capacity at the Hyderabad facility to meet demand.

• Chromium Segment Competition: The company has exhausted its full installed capacity in the chromium segment and is investing in both primary chemicals and derivatives in the next financial year to penetrate new markets.

• Baryte Acquisition Benefits: The benefits of the baryte acquisition are expected to be seen in Q4, with current utilization levels at about 60%.

• Revenue and Profitability Guidance: The company does not give revenue or profitability guidance for FY25 but aims to achieve an EBITDA margin of more than 16%.

• Competitive Landscape: The company is facing some competition in the PBS segment from Chinese players but is positioning itself as a quality supplier with a price difference of 5-8%.

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Hi Ashish, the company has grown reasonably well since the time you posted about the co. ( June’21 )…Are you still holding this as the p/e is expensive now at 64…

Vinati Organics Limited Q3 FY ’24 Results Conference Call February 12, 2024

• During this quarter, NCLT sanctioned the scheme of amalgamation with Veeral Additives Private Limited. into Vinati Organics with effect from 1st April 2021

• We expect Q4 numbers to slightly improve over Q3 or be in similar lines. I had mentioned the de-stocking effect in the overall sales as well as in ATBS, which I believe now is almost over. We are seeing sales of most products, including ATBS seeing pickup. Looking at this, I expect the demand to normalize in the coming months

• The butyl phenol business has also scaled up well and delivered decent growth this year, and we expect the momentum to continue next year as well

• We make four types of butyl phenols. The mono-butyl phenols are used in the fragrance industry as well as the resin industry. The di-butyl phenols will now be used mostly captively in Veeral Additives to make the antioxidants

• The sales of IBB have also picked up starting the last quarter, and next year we are expecting to do higher numbers in IBB as compared to this financial year. Isobutylene as well as the highpurity MTBE continues to remain stable, along with our basket of customized products, the niche products, they all remain steady

• We also commissioned the ortho-sec butyl phenol as well as the di-sec butyl phenol plant in this quarter. These products find application in agrochemicals, polystyrene, and perfumery. The DSBP is used in surfactants as well as in liquid dyes

• We are the only manufacturer of OSBP and DSBP in India and expect about INR80 crores revenue at full capacity

• The antioxidant business. In this financial year, the sales from antioxidants, we make five types of AOs. The phenolic ones are the 1010, 1076, as well as 135. The phosphite one is 168. We also make 10-98. They are used in different applications in polypropylene as well as plastics, lube additives, and the nylon industry. This year, the revenue from this business will be about INR100 crores to INR120 crores, which is at 25% capacity utilization

• We are focused on optimizing our efficiency and ramping up sales in the coming months in antioxidants, and we expect this business to be a growth driver for our company as the demand normalizes. We expect to reach full capacity utilization in the next two to three years. We supply these AOs both in the domestic as well as the export market. We are also actively working on adding more antioxidants to our portfolio

• The long-term outlook remains positive. Now coming to VOPL, Veeral Organics Private Limited, which is a 100% owned subsidiary, a setup for manufacturing niche specialty chemicals. We have lined up a total capex of approximately INR 480 crores, mainly consisting of products, MEHQ, Guaiacol, 4-methoxyacetophenone, and isoamylene derivatives, as well as anisole. These products are used as polymerization inhibitors, pharmaceuticals, fragrances, and personal care. The MEHQ-Guaiacol plant is expected to be commissioned first by March 2024

• Our long-term view on ATBS remains unchanged, and the ATBS expansion is expected to be completed by December 2024. With sustainability being a core part of our value proposition, we commissioned about 15 megawatts of solar power plant during fiscal year ’23. Then we added another 11 megawatts this year in FY24, and we will be adding another 7 megawatts in the fourth quarter of FY25

• We expect our revenue to have about 15% to 20% CAGR over the next three years, with growth coming mainly from antioxidants, the new products in DOPL, as well as growing demand in ATBS

Normally steel companies trade at 6x EV/EBITDA, and assuming this one does Rs8000-10000/t EBITDA on 2.8mnt full production. One is looking at an EV range of Rs13400-16800cr. Stock is already at Rs19500cr+ EV.