- Q2 FY25 revenue: INR 167.35 crores (+17% YoY), driven by a 16% increase in sales volumes.
- EBITDA margin for Q2: 18.8%, with expectations to remain between 17%-19% in the coming quarters.
- Export contribution: 66% of total sales.
- Industrial business: Contributed 82% of revenue.
- New US subsidiary to become operational in January 2025 to expand market reach.
- Gross margin improved significantly to 45% in Q2 (from 35% YoY) due to favorable product mix (Industrial segment) and contributions from the Pakhajan facility.
- Volume growth for Q2: 16% YoY; price reductions impacted overall revenue growth.
- The chemical sector remains under price pressure, but the bottom level of pricing is expected to stabilize.
- Pakhajan facility utilization: 15% in Q2; expected to reach 35%-40% in Q3 and 60% by Q4 FY25.
- Long-term guidance: Pakhajan facility to achieve 90% utilization by FY26.
- Industrial chemicals remain the primary revenue driver, with expected volume growth of 30%-40%.
*Continues to gain market share, leveraging a strong product portfolio and approvals pipeline. - The lubricant additives market estimated at $10-$12 billion, growing at 3%-4% annually.
- Export markets, particularly the US and Europe, account for over 70% of industrial segment revenue.
- Inventory levels increased due to customer trials and future production planning.
- Working capital cycle currently at 200 days, expected to normalize to 110-115 days by March 2025.
- Long-term debt repayment starts from FY26, with plans to reduce debt-to-EBITDA to 3x by FY26.
- Gross margin improvement attributed to product mix optimization within the industrial segment.
- Pricing pressures impacted revenue despite volume growth, with chemical prices expected to stabilize.
- New customer approvals for Pakhajan products are progressing, with significant ramp-up expected by Q4 FY25.
- Cautious due to global chemical sector volatility but confident in maintaining EBITDA margins.
- Operationalization of the US subsidiary in January 2025 to cater to smaller customers with shorter lead times.
- Focus on long-term contracts to mitigate pricing volatility.
- Infrastructure investments (e.g., Pakhajan facility) provide room for future capacity expansions at lower incremental costs. Double the capacity with 200cr investment.
- Long-term focus on sustainability and competitive positioning in mature markets.
- Stabilizing raw material and freight costs.
- Increased demand in industrial chemicals.
- Global pricing pressures in the chemical sector.
- Delays in customer approvals impacting capacity ramp-up.
- Pakhajan facility expansion allows for incremental capacity additions with minimal infrastructure costs (~INR 200-250 crores).
- Long-term plan to expand capacity post-70% utilization.
- Export to the US and Europe remains a significant contributor to revenue.
- Tariff changes in the US may present opportunities, though uncertainty remains.
- Growth focus on Central and Latin America for diversification.
- FY25 revenue target unlikely to reach INR 900 crores due to pricing pressures, but volume growth remains strong.
- FY26 revenue target of INR 1250 crores maintained, with expectations of better price stability and margin improvement.
- Long-term debt repayment begins in FY26 (~INR 25-30 crores per annum).
- Future capex will leverage existing infrastructure at Pakhajan to minimize costs and enhance ROCE.
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