Meghmani Organics Ltd

FY23Q4 concall notes

• Pigment: Low demand + fall in realizations. Expect growth in pigment division in FY24 over FY23
• TiO2 plant with installed capacity of 16,500 MTPA is under trail run and expected to be stabilized in Q1FY24
• Muted demand in agchem sector continues in Q1FY24, RM prices have come down significantly. Hoping for revival in Q2FY24
• Agchem technical prices have come down 40-50%, but RM prices and logistic costs have also reduced significantly. Similar situation happened in 2008 period after China Olympics

2008 background

• Sales growth was muted in FY10 and revived in FY11, but margins only started reviving in FY12. So sales was flat for a year but it took 2-3 years for revival in profitability
• Volume growth in agchem sector will not translate into revenue growth for FY24. Hoping to see positives in Q2FY24
• MTM gain on receivables (76 cr.) shown in other income, MTM loss on foreign currency borrowing (-46 cr.) shown in finance cost
• Commenced manufacturing of Lambdacyhalothrin, Flubendamide and Beta Cyfluthrin, Cyfluthrin and Spiromesifen from the Multipurpose plant at Dahej catering to domestic and export markets. Will ramp up to 50% in first year, 65% in second year and 75% in third year of operations.
• Expect 650-700 cr. of revenues from this facility (no new incremental capex is required to achieve this)
• TiO2 prices have started improving from 160 to 190+, ilmenite prices have gone down from 44-45 to 28
  
• TiO2: Will manufacture using Sulphate process and will have captive power plant. Not targeting medical grade TiO2. In good years, it can do 20%+ margins and should do 15-18% in average years
• Average cost of loans is around 3.5% (due to foreign currency loans)
• Current production of all agchem cos are lower to minimize high cost inventory
• $100mn agchem contract has already commenced, it will be equally distributed in 5-years, have all the required registrations
• Demerger will happen in 2-3 years once pigment division is normalized
• Fire: Bringing in more automation to reduce such instances, management is seriously working on this to bring down such fire instances

Disclosure: Not invested (no transactions in last-30 days)