Fairchem Organics – Previously “Adi Finechem”

Fairchem came with flattish results (6% sales growth, flat EPS), however the internals look very strong. They grew volumes by 13% in a tough year and are confident of double digit volume growth in FY25. Additionally, they are confident that isostearic acid will reach 100% utilization by September 2024 as they have more orders than capacity. Management is expecting 15-16% EBITDA margins by Q4FY25. Concall notes below

FY24Q4

• Volume growth of 15% QoQ and value decline of ~8% (due to decrease in raw material and finished product prices**). Paint industry volume for them grew by 15%** (higher than industry level growth of 10%) due to increased penetration into existing and new customers

• Process quantity was 19,000 MT in Q4 and 65,000 MT in FY24 (13% growth in FY24). Expect ~72,000 MT in FY25

• Linoleic acid: 46% (~286 cr.), dimer acid: 27% (~168 cr.). Not seeing any Chinese dumping in dimer acid (66-70% market share in India, rest is imports)

• Export: 5% of Q4 sales

• Isostearic acid:

  • Currently depressing EBITDA margins due to initial losses incurred as loss of material and high utility cost while stabilizing production process and reach desired quality level

  • Did full container load exports to Europe in March and have secured more export orders from existing and new customers (in Europe, USA)

  • Expect 100% capacity utilization by September 2024 and will potentially reach 15% EBITDA margins by Q4FY25

  • Have more orders than what they can fulfill

• The new product they are working on with new raw material is still in R&D and they don’t expect commercialization in FY25. It’s a biodegradable product used in lubricants and other high value applications

Disclosure: Invested (position size here, no transactions in last-30 days)