Sumitomo Chemicals India Ltd –
A leading agrochemicals company in India
Current number of manufacturing facilities @ 05 in Maharashtra, Gujarat
Manufacturing 15 Active Ingredients, 200 + brands. Company has 15000 + direct distributors and 60 Depots. Employee strength at 1600 + over 1500 + field development officers ( contractual )
R&D team comprises of 75+ dedicated engineers, 10 + Phd’s with experience > 15 yrs
Product wise revenue break up –
Insecticides – 40 pc
Herbicides – 30 pc
Plant growth regulators – 10 pc
Fungicides – 7 pc
Metal Phosphides ( used as fumigants against insects and rodents in stored grains ) – 7 pc
Animal nutrition – 6 pc
Geography wise revenue break up –
India – 89 pc
Exports – 11 pc
Breakdown of domestic sales –
Branded – 82 pc
Bulk – 18 pc
Breakdown of export sales –
Branded – 39 pc
Bulk – 61 pc
Future capex plans –
Regular maintenance capex @ 70-75 cr / yr
Additional capex of Rs 120 cr over 2 yrs for 05 new products ( Active Ingredients / Technicals ). These AIs shall be supplied to the parent SCC, Japan. These products have a revenue potential of 200-250 cr / yr at present. These products are also reporting healthy growth rates across the world
Company is focussing on manufacture of additional off patent products for India, LATAM, Africa and Asia pacific. This will entail additional capex and the same is under consideration
Last 5 yrs –
Revenue CAGR @ 13 pc
EBITDA CAGR @ 25 pc
PAT CAGR @ 28 pc
Company enjoys great parentage. Has access to parent’s global supply chain, R&D
Q2, FY 24 highlights –
Weaker monsoon in June, Aug affected the demand for agrochemicals. El-Nino also played a spoilsport
Revenues – 903 vs 1122 cr
EBITDA – 188 vs 278 cr, Margins @ 21 vs 25 pc – margin drop primarily led by operating de-leverage. High cost inventory also had an impact
Net Profit – 144 vs 202 cr
Export sales adversely affected due to channel overstocking due aggressive dumping of generic products by Chinese players in preceding 6-9 months
Company has consumed all the high cost inventory and is now back to normal. This should help profitability in q3, q4
Working capital cycle shrunk to 70 days from 91 days in Q2 FY 23. Company has seen improved collections vs previous years thus maintaining better sale hygiene
Launched 06 new products in Q1, Q2
Company’s new launches ( in speciality segment ) in last 1-2 yrs have been received very well in the Mkt. Consumers response has been overwhelming. Its just that due to the unfavourable mkt conditions this yr, the same could not translate into better sales / financial outcomes
Due to exhaustion of high cost inventory and general drop in RM prices, margins are expected to see some recovery wef Q3
Global demand scenario for agrochemicals Industry looks better for H2 vs H1
Long term Capex guidance @ 15 pc of EBITDA / yr
Company’s animal nutrition business is in nascent stages right now. Is growth fast on a small base. Can be a significant growth driver going forward
Business de-growth in H1 has been 15 pc. 3 pc has been due to price, rest due to volumes de-growth
Don’t see high channel inventory related problems in Q3, Q4 wrt Domestic Mkts. However, the situation is still not normal in the International Mkts. Normalcy in global mkts may resume only after Q4 / Q1 FY 25
There is no problem wrt demand for agrochemicals in the export Mkts. The whole issue is about overstocking in the channel and steep cuts in the prices of the inventories held. Its across the board / across companies kind of phenomenon
Company is virtually debt free. Cash on books > 1400 cr. Looking out for small / bolt on kind of acquisitions
Company expected to spend 200-300 cr towards fresh capex at Dehej wef FY 25 , for next 2-3 yrs
Have launched a new plant growth regulator for Apple in India. Rapidly gaining market share
Avg margin losses due high cost inventory in Q1 was around 12 pc and around 5-6 pc in Q2. In Q3, the margin loss is expected to be around 1-2 pc
Disc: not holding, may buy in future, not SEBI registered
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