Chemplast Sanmar Ltd

FY23 Q2
Results
Investor Presentation
Concall Transcript

• H1FY23 EBIDTA Margins 11% ( down from 19% ) , compression mainly due to high RM costs, energy costs and low realisations in PVC
• Volumes of all products witnessed an increase in H1-FY’23 compared to the volumes in the corresponding period last year
• Custom manufacturing will grow by 30% in FY23 (H1FY23 EBIDTA contribution from this segment is 65% vs 50% last year H1) , earlier guidance was 15% now revised to 30% due to more visibility
  • Uncertainty in the pricing environment continues for Paste PVC and Suspension PVC (Mainly due to covid restrictions in China that lead to less consumption in China and the same is being dumped into other countries that lead to price erosion)
  Expected to normalise by end of Q3
• Pre pandemic domestic PVC demand is 3.3 million tonnes, we are 15-17% away from these numbers, the demand will come back to this level and there is scope to grown beyond that (new capacities will come up in phased manner and those can be absorbed , will not have a situation of oversupply)
  • Feedstock (EDC and VCM) prices have also dropped, albeit with a lag. The benefit will however be realized only once the PVC prices stabilize; expect price stability by end of Q3
  • Custom Manufacturing business continued to see healthy demand in Q2-FY’23
  • In Q2-FY’23, Other Chemicals(- Includes Caustic Soda, Chloromethanes, Refrigerant gases and Hydrogen Peroxide) delivered a 37% increase in revenues on y-o-y basis, primarily led by growth in terms of both volumes and prices of Caustic soda
  • Cost of Power and Fuel increased by Rs. 132 Cr and by Rs. 61 Cr as compared to H1 and Q2 of FY’22, respectively. This is mainly due to increase in coal and natural gas prices
  • In H1-FY’23, the company spent Rs. 115 Cr for capex. Both the Paste PVC and Custom Manufacturing expansion projects are on track
  • With a healthy cash balance of Rs. 1,400 Cr, the company continues to be net cash positive on a consolidated basis
• To onboard a new molecule it takes anywhere between 18-24 months

Key Triggers to watch out for

• Paste PVC Expansion project at Cuddalore on track ( Capacity 41,000 tonnes ) will come on stream by Q2FY24
• Multi purpose custom manufacturing plant phase 1 expansion is on track (due to high visibility on the product pipe line phase 2 expansion will also be clubbed with this and executed ) will come on stream by Q2FY24
• A key customer (global innovator) signed letter of intent to supply advanced intermediate for recently launched Active Ingredient (AI) (Appears to be agro chemical, from the management commentary this appears to be blockbuster molecule )
  1/3 of the new custom manufacturing setup capacity will be used for this AI , rest of the capacity for other products (This is kind of Europe + 1 kind of relation )

Finance

• Finance costs have come down to 40 crores compared to 149 crore YoY
• Total capex spent on custom manufacturing is 310 crore ( Phase 1 – 260 crore , Phase 2 – 50 Crore now both are merged and executed as phase 1 , if required the capex for prposed phase 2 may even go further as well)
• Total cash on books ( 1400 crores of which 850 crores is with CCVL and 550 crores with holding company
• Long term debt 842 crores out of which 692 crores debt run till 2030 and another debt of 150 crore will be paid off in 4 years time