Q1FY23 Key Concall Takeaways
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Demand Outlook: Although AIL has slightly outperformed in the current quarter in terms of topline guidance company has maintained its guidance for FY23, of 10% top-line growth& 8-9% EBITDA growth as management witnesses little turbulence in demand from Textile and FMCG (dyes & pigments segment) & raw material costs pressure from core products like benzene & higher utility prices.
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Production Volumes for Specialty Chemicals: For Q1FY23 volumes across product segments were:
NCB - 20515 MT in
Hydrogenation – 3295 tonnes/month
Nitro Toulene – 5252 MT -
Specialty Chemicals top-line: Specialty chemicals grew 44% YoY, with about 75% share of the revenue from value-added products during the quarter. Growth came in from increased realisations from value-added products &the price hikes taken to pass on the increase in cost. The pass-on of cost increase happens in a month in the domestic market, whereas in the export market, the lag is of 2-3 months.
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Pharma Division: The segment reported 48% growth on a YoY basis &5% growth on a QoQ basis. Robust growth in topline performance was attributable to a positive demand landscape for key products. Higher uptake from Generic Pharma companies aiding topline growth and strong revenue visibility. The expansion of capacity for the USDA-approved API facility is in the final stages and is expected to commercialize in Q1 FY23.
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New Capex and Expansion plans:
The management has also guided for a Capex of Rs 3000 Cr for the next 2 years. Out of the projected Capex company has spent 200 Cr in the current quarter.The Capex will be majorly for adding more downstream products in the current benzene chain, new Chloro Toluene chain and debottlenecking of the existing products.
All the capacities set up during FY22 should ramp up and clock utilisation of ~70-90% by FY24-end. Incremental Capex would be mainly utilized for high-value products.
50% of the Capex will be for the existing products and contracts, while the remaining for the new product development. A large part of the Capex would be towards chemical products 2500-3000 Cr, whereas for Pharma it would be in the range of 350-500 Cr. Site development work to commence on100+ acre land at Jhagadia. AIL also acquired over 120 acres of land at Atali, Gujarat. Environmental Clearances obtained / inprocess. Construction from FY22 – FY24
The company will be coming up Concentrated Nitric Acid plant by FY24 to take care of Nitric Acid requirements, the company is evaluating the feasibility of going for a Weak Nitric Acid integrated plant to be completely self-sufficient, the management has a project cost of 150-200 cr for CNA plant whereas Capex of 500CR + for WNA & CNA plant.
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Long-term Contracts:
Capacity created for 1st long-term contract should ramp up utilization levels to the tune of 70-80% by FY24- endThe company commissioned a second long-term contract during Q1FY23and is expected to contribute to revenue starting from Q1FY23. The annual contracted sales for this contract are 500 Cr and shall be seen adding to the topline with a ramp-up in utilization over FY23.
The 3rd contract should start by Q2 FY23 and ramp up over the next two years FY23-24.
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RM Availability: Nitric acid shortage continues to affect the production of a few linked products. Management is planning a Capex for Concentrated Nitric Acid to the tune of 150-200 Cr with a capacity of 60,000 MTPA. The plant will commission by the end of FY24 as a backup to reduce the company’s dependency on local players. In the near-term company expects supply to resume from H2FY23 onwards as new capacity in India will be ready.
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