I used to track this co., in the past and used hold few from the IPO allotment. Although a small/swing account holding, i booked out early sometime in 2022. The business was IPO’ed at the peak of chemical upcycle, and was priced to perfection i believe and is stuck in the headwinds across chemical sector. Now, the bottom is anyone’s guess, but i believe the business/segments they operate worth tracking and one has to analyze how their expansion plans including new molecules perform, along with the general chemical sector’s rebound.
I just put together last few AR’s and latest Q’s result to get some idea on its product segments revenue trend and performance.
Q2 PERFORMANCE/EARNINGS QUALITY
Continuing Challenges: TCPL’s financial performance in Q2 FY25 and H1 FY25 reflects the continuation of the challenges observed in FY24. This is evident in the decline in consolidated revenue from operations, which contracted by 13.92% in Q2 FY25 and 10.48% in H1 FY25 compared to the respective periods in the previous year.
Margin Pressure in PTC: The Phase Transfer Catalysts (PTC) segment continues to face margin pressure. The segment’s revenue declined by 30.1% in Q2 FY25. While specific segmental EBITDA margins for the quarter are not available in the provided sources, the overall decline in profitability suggests ongoing challenges in this segment.
SDA’s Resilience: Despite the challenging market conditions, the Structure Directing Agents (SDA) segment continues to demonstrate resilience, with revenue growing by 22.4% in Q2 FY25. This reinforces the segment’s strength and TCPL’s strategic focus on SDA as a key growth driver.
Profitability Decline: The consolidated profit after tax (PAT) declined significantly in both Q2 FY25 and H1 FY25. The PAT margin contracted to -0.80% in Q2 FY25, a substantial drop from 8.19% in the same quarter of the previous year. This decline is attributed to a combination of factors, including lower revenue, pricing pressures, and potentially higher operating expenses.
Cash Flow Impact: The decline in profitability has impacted TCPL’s cash flow generation. The consolidated cash flow from operating activities was negative in H1 FY25. This could limit the company’s ability to invest in growth initiatives or necessitate additional financing in the near term.
Table 1: Segmental Revenue Contribution (%)
| Segment | FY23 | FY24 | Q2 FY25 |
|---|---|---|---|
| Phase Transfer Catalysts (PTC) | 34.02 | 27.33 | 30.23 |
| Structure Directing Agents (SDA) | 30.32 | 42.38 | 32.45 |
| Electrolyte Salts & Solutions (ESS) | 3.93 | 1.29 | 1.49 |
| PASC | 31.73 | 28.93 | 35.56 |
| Others | 0.15 | 0.07 | 0.60 |
Table 2: Segmental Revenue (₹ Million) and Insights
| Segment | FY23 | FY24 | Q2 FY25 | Observation |
|---|---|---|---|---|
| Phase Transfer Catalysts (PTC) | 1,432 | 1,067 | 252 | Declined in all periods due to aggressive pricing competition and lower raw material prices impacting realization. |
| Structure Directing Agents (SDA) | 1,276 | 1,655 | 270 | Showed resilience and growth, driven by robust demand and TCPL’s position as the second-largest global manufacturer and the largest in India. |
| Electrolyte Salts & Solutions (ESS) | 165 | 50 | 12 | Experienced a steep decline due to a weak Chinese market and delayed procurement by a major customer, underlining the segment’s susceptibility to market-specific fluctuations. |
| PASC | 1,335 | 1,129 | 297 | Remained relatively stable in FY24 but declined in Q2 FY25, suggesting resilience but not complete immunity to broader industry challenges |
| Others | 6 | 2 | 4 | Consistently contributed minimally to overall revenue |
| Total | 4,208 | 3,904 | 834 | Reflects overall industry challenges in FY24 and a more pronounced decline in Q2 FY25, primarily driven by pricing pressures in PTC and demand fluctuations in ESS. Despite this, SDA emerges as a growth driver. |
KEY OBSERVATIONS
SDA’s Ascendancy: SDA’s contribution to revenue significantly increased in FY24 and continued to grow in Q2 FY25. This is noteworthy given TCPL’s prominent market position and the niche nature of the SDA sector.
PTC’s Vulnerability: The sharp decline in PTC revenue across all periods highlights its vulnerability to pricing pressures and fluctuations in raw material costs.
ESS’s Dependence: The ESS segment’s performance is heavily influenced by specific customer and market dynamics, particularly in China, making it prone to volatility.
MANAGEMENT STRATEGIES
Continued Product Development: TCPL’s ongoing focus on developing new products across various stages may help counter revenue declines in certain segments and drive future growth.
Capacity Expansion: The expansion of the Dahej SEZ facility is expected to enhance operational efficiency and support future demand growth, potentially benefiting all segments.
Overall, while Tatva Chintan faces challenges due to industry dynamics, its focus on SDA, coupled with product innovation and capacity expansion initiatives, suggests a strategic approach to navigating the volatile market and seizing emerging opportunities.
Note: The report is filtered through AI tools; please correct me if there are any errors or omissions.
Disclosure: Not invested. Post purely for study purposes. Do not take any investment decisions without consulting a registered advisor. thanks.
| Subscribe To Our Free Newsletter |
