Rossari Biotech Ltd – Can growth justify expensive valuation?

Rossari Biotech Q1FY25 Concall Summary

Business Updates

• The development of the simple component emulsifier for the agrochemical industry especially for herbicides helps in better absorption of the products by the crops
• The focus is to develop advance environment friendly products for the industry
• Q1FY25 was the best quarter in terms of revenue and profitability
• The management is witnessing faster growth in exports markets than the domestic markets
• The expansion at Dahej is expected to be completed by end of current year

Participants

Axis Capital

Nirmal Bang

ICICI Securities

Ambit Asset Management

HDFC AMC

ASK Investment Managers

Incred

Centrum Broking

Yogya Capital

Anand Rathi Share

QnA

• Prices are mostly stable now and growth is being witnessed from increase in volumes
• The current EBITDA margins are the new normal and on the standalone business and also on the subsidiary this is the EBITDA that will be seen going forward
• There was a product reclassification in the textile chemical business, which led to the base being lower in the textile chemical business. This was only in one quarter
• The cosmetics business has grown well and the particular surfactant which is used in personal care for both domestic and global market is giving good business
• In the last few quarters most of the growth is being driven by exports and this has happened in both HPPC and textile chemical as well
• Usually exports have been 20% of total revenues and that has gone up to now 24% of revenues and between 25-30% is something what the management is looking for in the next two years
• The textile market in Bangladesh is bigger than the Indian market and barring forex issues the size of opportunity is larger and that should lead to better traction in revenues
• The outflow for capex in FY25 will be Rs 100 crores
• The pricing for a lot of chemicals in India is getting much better competitively compared to many of the import prices and hence these are now being sourced from Indian companies
• For the new facilities the optimum utilization should be achieved by FY27
• The subsidiary in Dubai has been incorporated for global expansions that might come up in future instead of setting this up through the Indian company
• Post acquisitions done in the past the product portfolio has changed and the working capital intensity seen in recent times which has increased from earlier should be considered as the new norm