Ami Organics – Pharma Intermediates & Specialty Chemicals

A lot of things are happening at Ami Organics. Management has promised a lot, and managed to deliver so far. A few more critical executions are expected in the coming year. Let’s see how this pans out but looks quite interesting at this stage. The results were in line and concall was quite bullish. Given below are a few points I managed to capture (though the actual call has a lot more I must say). Usual disclaimers of E & OE apply.:

Some highlights:

1. Electrolyte additives which have been approved by six clients and some of them have released plant scale trial orders. Received commercial trial order from more customers.
2. We have been able to sign long term exclusive contracts with some of our big customers (I think this is for pharma segment)
3. New products in specialty division have high entry barriers.
4. Expanded scope of Fermion contract to add more advance intermediates for the same API resulting in multi fold increase in contract value. Increased scope from 1 to 3 products.
5. Added ~40 New Customers under API during the year and added ~20 new customers during the year under specialty chemicals
6. Developed two new products: One Liquid electrolyte additive to increase electro capacity of Li batteries and one for Solid battery.
7. Acquisition of 55% stake in Baba Fine Chemicals (BFC), a leading specialty chemicals company supplying products to the semiconductor industry. BFC has very niche products with high entry barriers. They have strong balance sheet with zero debt.
8. We have 50-90% global market share key molecules (Which are these molecules – need to find out)
9. Chronic Therapy focus: 91% in AI segment
10. When will the Ankleshwar site be ready – Dec 2023. Asset Turnover will be 3X normally, since our products are high value products.
11. Chinese chemical industry is back into the game which is hurting many players. But we are not affected.
12. Working on plans for expanding capacity in chemicals. 2 more products in this segment
13. Full year margins going ahead for FY24:
    AI – 23 % target
    Spec Chem – improvement of 50 -100 bps target
14. Spec Chem – 20 molecules developed, LOI signed and started qualifications. Target growth 25-30 % growth this year
15. Capex for FY24 – Rs.35 crore maintenance capex + some for solar + some for electrolytes to be announced later
    Greenfield capacity capex – Rs.160 – 170 crore
    Total capex for the year – Rs.200 to 220 crores
16. Baba – will grow 4X per year and margins will be around 40 %
17. Fermion – deliveries start in Q3 FY24 but in FY25, volumes will be very big as the product is growing 3X. They don’t have capacity.
18. Working capital – currently 108 days wc cycle will try to bring it to 100 days.
    Trying to get more credit from suppliers
    Trying to reduce receivable days by 10 days.
19. Anti-Coagulant revenues – 12 % of total revenues currently
20. Electrolyte – we have 4 products now, 2 in commercialization stage and 2 new. For the first 2, we have orders in hand and customers are outside India.
21. This time all growth has come from volume growth whereas pricing is actually under pressure
22. Current provisions – when invoices are pending for booking, they go under current provisions.

(Disc: Holding)