Omkar Specialty Chem – Concall Update – 2H will be better than 1H on topline growth (Fund raising on cards if they go for acquisition)
· Revenue breakup – Of the total sales, for Q2 about 44% came from Iodine derivatives, about 34% from intermediates, about 17% from API’s, Selenium derivatives about 4% and rest came from resolving agents. During Sep’15 quarter, about 92% sales came from India and rest were from exports. For 1H, about 31% of total sales came from Iodine derivatives, about 43% from intermediates, about 20% from API’s, Selenium derivatives about 4% and rest came from Resolving agents. For 6 months ended Sep’15, domestic sales contribute about 61% of total sales and rest were from exports.
· Higher trading volume led margin contraction – OPM was lower on YoY basis by about 190 bps YoY, as sales for Q2 included Rs 20crs of trading business. These trading business were relating to sales on trail and error of products before going for a complete commercialization. As per the management, commercialization of some of these new products which are iodine derivatives will take place in H2FY16.
· Leverage – Gross debt stood at Rs 218cr vs Rs 224cr in Mar’15. There were deferment of some short term debt in consultation with banks which led to increase in LT debt from Rs 60cr to Rs 115cr while ST debt declined from Rs 140cr to Rs 100cr as of Sep’15. D/E at 1.17x vs 1.32x in Mar’15. Company plans to reduce debt by Rs 20-25cr by Mar’16.
· WC Cycle – Company’s WC cycle stands at 103 days as of Sep’15 vs 111 in Jun’15 and 143 days in Mar’15. Company targets to bring it down to 90 days over a period of time. In near term WC cycle will be around 95-100 days.
· Capex and expansion – Unit V received environmental clearances of its Unit V at its Chiplun facility and commercialization to start from Nov 2015 onwards. Thus the overall capacity of the company will increase gradually by 3000 tons by early FY17 and will further increase by another 2000 tons by early FY18. The company has done most of the capex and residual capex of about Rs 15 crore will be required further if any. At optimum capacity utilization of all the plants and units, the company can generate revenue of around Rs 800-850cr.
· 2H will be better than 1H on topline growth – Management guided that H2FY16 will show higher revenue growth on YoY basis than H1 growth. Further, OPM is expected to improve further and will inch towards 21%. As per the management, new products in higher margin segments and newer geographies will drive higher margins and revenues going forward
· Fund raising only if company go for acquisition (Key Overhang) – Company is look out for Formulation API plant in veterinary space with approved facilities for EU/US markets. Company will fund it through equity (QIP) mostly. Not yet zeroed down to any potential target and its strategic plan to integrate its business. For ongoing business, no need for funds and is currently FCF positive.
· Update on Pledge – Mgmt guided that pledge to come down gradually going forward. Pledge was to fund WC requirement
Overall..fund raising and another acquisition is unnerving…
Discl…not invested.. will wait for better entry point
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