Tatva Chintan – A catalyst for growth

Tatva chintan Q4 & FY 2023 concall highlights:
Results:
Q Sales of 124 cr. Rise of 22% yoy, yearly sales of 423 cr, a degrowth of 2%.EBITDA margins at 13% vs 22% in q422.
My take: poor show continues despite management’s earlier forecast of good growth from q423. Reason being stockpile of high cost inventory and low demand for SDA which was further aggreviated by drop in RM cost leading to drop in realisation.
Product wise performance & forecast:
SDA:
Contributed 30% to revenue, a decline of 43 % yoy.
Entire old inventory will be consumed by may end(this made me believe that Q1 should also be lackluster). SDA demand to improve from H2fy24. Submitted commercial trial order to large customer for 4 different applications. Expect full scale commercialisation from jan 2024.
PTC:
Grew 46% yoy( as sda demand was almost zero in q2, q3, they sold more ptc).
Electrolyte salt:
Now contributes 4% to revenue compared to 1% during ipo. This year many customers will go for trial order and full scale commercialization from fy 25.expect revenue to double by fy25.
PASC:
In q424, all three products using continuous flow chemistry (1.product for metal extraction. 2.dehydrated monoglyme for battery. 3.agchem intermediate which is key RM for many advanced agchem intermediate) to go into full scale production so expect exponential growth from q4.
BFR:
got commercial approval from 2 large customers. More approvals are in progress. But due to sudden drop in bromine proces and low demand, customer uptake is verylow. Initially we will go for low margin base products and then move to more advanced, higher margin FR.
Projections:
Will grow 20% in value terms fy24 with 18-20%
(Their ideal margins are 22-26 % but as current FR are low margins, they will consume some gain and secondly new capex is adding to cost as currently plant is running at very low levels. It will run at optimum levels only from q3/q4)
margins. Actually in volume terms, growth will be much higher but recently, realisations have dropped by 18-20% due to fall in key RM prices. So taking this drop in realisation into count, we will grow 20%.drop in revenue will not have any impact on ebitda margins.
Expect to grow by 75-80% in fy 25 from current levels.
Segment wise fy 24 growth forecast:
SDA: In value terms, it will be flat due to low realizations. Might be some volume growth. Euro 7 norms will increase demand for SDA.
PTC:likely to be flat.Have submitted for new applications. If that materializes, might see some growth.
Electrolyte salt:will see growth close to 100%.
PASC:management did not mention but my take is it will show good growth as this is rhe only segment that has shown consistent performance.
BFR: Sales can be near 50cr.By fy25, expect sales of about 200cr.

My take:current poor performance is not likely to last long . It appears to be a case of good company in bad times which is what i look for. But valuations are stretched. At cmp there is no margin of safety even if company beats management forecast for fy24. So for me its wait and watch.
Disclaimer: I do not have any holding in company as of now.