Concall@ Q1 -2025(Aug 2024)

As per management

=Growth triggers will be
A…Q pack
B…Pharma
C…ABG(paint)

=Descent numbers will be seen from 2026.

1…Expected growth

=Mid- to high-teens volume
growth for this year and possibly next year as well

2…New plants utilization

=All the projects have started
commencing their commercial production in the last few months, starting from our plant in
Cheyyar and Panipat for ABG and then the third plant is our pharma products at Sultanpur Hyderabad.

=Cheyyar and Panipat plants are
running around 15% to 25% capacity utilization.But now it is
around 40% in June. And we are seeing more than 50% utilization coming from July onwards.

=Pharma plant is hardly running at 10% capacity utilization. We are just doing a few EV tube sales have picked up. Various clients have taken our trial supplies, and filling line adoption and trial batches have been successfully completed. And now slowly, we expect the bulk orders to start coming in.

=Going forward, the good news is that both the pharma and ABG plants are indicated to do better in the coming quarters and hopefully will add better volumes from Q2 and Q3

2…F and F

=The Food & FMCG grew by about 4.5% compared to the previous Q1. But compared to Q4, it’s a healthy 24% growth.

A…Q pack

=It grew robustly at around 45% compared to the Q1 last year.

=Qpacks is where we are finding solid demand coming in, inquiries coming from major players for our edible and ghee and even other sectors. So I’m very confident of what we – last year, it did almost 60%, 70% growth in Qpack. Probably, it’s not that much, at least 40% to 50% volume
growth is possible in Qpacks.

=And in Qpack, our margins are not as good as thin walls. So that is why,
though, the 21% growth in the overall food and Qpack has come, it has not contributed handsomely to the bottom line improvement and EBITDA improvement

B…Ice cream

=Competition in some sectors of ice cream, especially in the interior sections in North and South, deep in the South, we are losing due to some competitors holding up with the standard ice cream packs

=There is some pressure. Once there is a competition increasing, you need to adjust your pricing
to retain your major players, so we could successfully do. But there are pockets of small players
and they, indeed, arise only in the season, due to which we also let go.
And they will be looking at – even at 3%, 4% price advantage and they’ll lap it. So that way, we
miss the growth burst in ice cream this season. And going forward also, that should be a reality,
because there will be players who will make standard products like ice cream cups and diary
cups also to some extent.
And they will be able to garner local demand,

=Bigger companies will look at, not only just the pricing, but they also look at the volume or ability to house several molds and several
robos, which will, in case of any breakdown, there won’t be any disruptions. So bigger players
won’t leave us.

=Like, same in the paint industry. Earlier, we used to supply to everybody. But today, we are only restricted to top 5, 6 companies.

=Similar to ice cream industry also, we are with all the top companies but let go some of these small companies who are far away and they’re periodic in their buying and they are very stingy about pricing.

=Do we plan to move beyond ice cream packs ?

Lakshmana Rao: Of course, this is the idea. We keep moving on with a new set of products for new applications.
And that – in this direction, we are – Qpacks are growing rapidly now because that is where we
are finding new adoption happening in various new product segments, so that is focus point now.
Even in North, we are starting our Qpacks at least 2 sizes, 10- and 15-liter will be starting in October and necessary equipment is being installed out

C…Growth in f and f

a)Q pack, ofcourse will have 40% to 50% volume growth

b)Our north plant, which will be starting in August, September, probably September, it will start some products and pick up by next season. It would be the way to grow again into double digits. That’s in Food & FMCG.

c)Couple of those projects got delayed, which has impacted the growth in this year. Once those clearances come, they will improve. It can happen from Diwali or even before Diwali.

d)Another reason some of the products which we have developed them molds, they have not yet taken off. Only Kissan Jam has taken off the past 2, 3 months. And other products, for HUL and others, are still in a different stage of adoption. So those numbers have not yet come to contribute

=But the numbers may not reach 20%, 25% growth levels, which we achieved in the last 5, 6 years. Such growth we will only see in pharma going forward.

=But Food & FMCG will continue to play an important contribution to our growth. I’ll be happy
even if we close only Food & FMCG thin wall at 10%, with Qpack around 40% to 45%. Therefore, together will be contributing around 20% to the volume growth.

4…Paint@ABG

= They are picking up faster now. The
pace of their production and the orders are increasing rapidly.

=And we hope hereafter, we can
even see around 8% to 10% growth coming in the paint sector.

=Coming to ABG, their indications are pretty strong. And our third plant, the Mahad, supplies will be starting from September on a trial basis. But by October, November, it will pick up pace. And those numbers will be added to improve our volumes further.

=We’ll be adding at least
60% to 75% capacities, which are currently for ABG

=ABG is certainly a torch bearer of growth for us for the next couple of years. And by then, pharma should be able to give us the impetus.

5…Pharma

=We are very excited about our entry into pharma because we notice, in pharma also, a lot of
players are not agile in terms of development of new products. It takes a long time in their
abilities to showcase to the pharma company about – by providing samples or 3D designs. Our
concepts, it seems to be, in our first few months of marketing, we noticed that the pharma industry is really looking for such a well player. So Mold-Tek can be run because of our product design, mold design and mold manufacturing facilities. So we’re really hopeful that our way to
pharma will be very successful in the coming years.

=Already in EV tubes IML, we have achieved a breakthrough, which many players could not do that

=And like that – in other products like canisters and various types of caps and bottles, we have
already submitted at least 5, 6 products newly developed within these 4 months to various clients.

=So that is the speed at which we are able to develop new products. I’m sure that is where I’m going to be, our USP in winning the clients

=Already, 4 major clients have audited and cleared our premises and accepted us as the vendors. Several
products, I would say, more than 4 to 5 products are under development. Most are at final stage now. Some samples have also been submitted. As I told you, the stability tests and approvals
take a long time in pharma. But some of them are on the anvil, which could even get cleared in September, and some of them in October and November.

=Almost 6 or 7 such players have already put us in the list. And some of the products have been already
offered to us for development and sample submission.
So this process takes maybe another 3 to 6 months to stabilize

=So for a company which is hardly 3 months old, getting 7 audits done and 3, 4 already
approved is definitely a good milestone

= I’m very positive the way our plant has been approved by various major pharma players and being given a clean chit to go ahead to their respective vendor development teams.

=So as I said, from Q3, we will see decent numbers coming from pharma. In this Q1, it’s hardly a
beginning with 80 lakhs worth of goods sold in pharma sector. But this number can swell in the
coming quarters, maybe second quarter, it could be INR2 crores to INR2.5 crores. But in the
third and fourth quarter, it can go up to INR5 crores to INR6 crores each. So our overall guidance
of around INR15 crores to INR20 crores, we are still confident in pharma, which will be coming
at a much higher EBITDA. So once those numbers come in from third quarter, we’ll be seeing
better growth in both in terms of volumes and even in EBITDA.

=If things go well in pharma, what we anticipate will be more stable from next year because this
year will be our introductory and then approvals and statutory clearances and various things,
which we almost crossed. But client approvals and stability tests will take a little longer time.

=. From Q3 onwards, we will be
seeing decent numbers coming in. But the numbers, if you ask me, in the year ’25/’26, they will be decent. And if things go well as per plan, ’26/’27 would be a major year where pharma will be contributing handsomely, and that can shoot up our numbers beyond INR1,000 crores top line and even INR100-plus crores in the PAT.

6…Revenue

=In terms of revenue, paint is 42.5%, lubes is 23.8%, Food & FMCG is 21.17%, Qpack is 12.11%,
pharma is 0.4%.

7…Near future growth

Q=You mentioned you’re maintaining a mid-teen kind of a volume guidance for the year, so that there’s an extremely high 9-month run rate to catch up. So apart from the ABG, which is expected to operate at 50% utilization of around 1,000 tons, any
other green shoots you are seeing in the lubricants or the base paint customers that you’re adding
for such a high 9-month run rate?

Ans=

A…ABG, more than 1,000 tons per month will be the addition because Mahad plant also will start from September, .

B…Pharma
So along with that and pharma, we are still hopeful that we’ll be reaching
close to 15% volume growth.

=Q2, that is rain-impacted season, will be difficult to clock such a big number. But from Q3 onwards, we see a good ramp-up coming up in our capacities to ABG and also numbers from
pharma. Yes, it is a challenge, but we still keep 15% as our guidance. We try to achieve that.

8…Asian paint

Q=For the Asian Paints, like, we have not lost any kind of a market share?

Ans= No. I don’t think that is the case with Asian Paints. Probably, their developed 1 or 2 plants are
subdued due to various reasons, but they are not impacted as of now at least, certainly not.

=There is no conflict of interest for our business with ABG as we also supply other paint companies too.

Disc…invested

The Company had guided 20k cr AUM by FY 25 . The growth in MSME and bridging their credit gap through digital lending was the whole premise of investing in Ugro Capital. Based on Q1 update, AUM does’nt look like even touching 15k crore.

Disc: Exited after Q1 updates with Opportunity cost losses.

Sir, did you get any reply from management on break up cost of the dolphin assets interest cost and depreciation to conclude the PAT.

(post deleted by author)

Sharing my portfolio update. Lots of new entrants post the last update. Overall portfolio size has grown at descent clip (Almost everyone would have the same experience).
Not very proud if the way the portfolio looks like. Need pruning of stocks since the portfolio looks like a potpourri of sorts. Will be happy to discuss on the investment thesis of any of the stocks further.