Came across this term Lease liabilities and Right of use assets on balance sheet of Awfis ~ indicatively 570 cr of lease liabilities and Rs 580 cr of Right of Use assets as on Mar 2024. I understand that lease liabilities are the present value of lease payments to the landlord/commercial space owner over the lease term. Any idea if this is net of the lease payments to be received from the client by the occupier. Thanks a lot

Allotment of Plot at SEZ Pithampur, District Dhar (Madhya Pradesh)

https://nsearchives.nseindia.com/corporate/JASH_31072024145049_JASHLANDALLOTMENT.pdf

detailed initiating coverage report on Archean chemical by DRChoksey.
DRChoksey_Initiating_Coverage_on_Archean_Chemical_Ltd_with_24%_UPSIDE.pdf (876.4 KB)

next leg of growth will come from bromine derivatives, 50% capex spending is done and benefits will come from FY25.
below is valuation summary
Archean Chemical demonstrated strong resilience in FY24,
maintaining a 35% margin despite revenue and profit growth
moderation. The industrial salt segment’s robust performance
offset declines in bromine revenue. With INR 130-140 crore
already spent on capex, benefits from the bromine derivative
business are expected to materialize starting FY25E. We
project a CAGR of 34% in revenue and 44% in net profit
during FY24-FY26E, driven by volume recovery and new
product lines. Valuing the stock at a P/E multiple of 17.5x
on FY26E EPS, we recommend a BUY with a target price of
INR 943.

a) Q1 FY25 results: The company’s Q1 FY25 revenues stood at Rs 55,100 crores, up 15% YoY, whereas EBITDA stood at 5,620 crores, up 15% YoY. EBITDA margins stood at 10.2%, flat YoY. PAT stood at Rs 2,800 crores, up 12% YoY. The company’s TTM ROE stood at 14.7% versus 12.8% YoY, partially due to the buyback. Other income was lower due to lower investments pertaining to the share buyback.

P&M EBITDA margins stood at 7.6% versus 7.4% YoY. International revenues constituted 48% of the total revenues in Q1 FY25 (versus 40% YoY). The revenues for the P&M segment were up 18% YoY in Q1 FY25. The company’s CFO stood at negative Rs 500 crores versus negative Rs 990 crores YoY. This is majorly due to the buildup in working capital. Net debt/equity ratio stood at 0.67 versus 0.64 QoQ.

B) Order book status: The company’s order inflows stood at Rs 70,900 crores in Q1 FY25, up 8% YoY aided by strong momentum in the Middle East. The company’s orderbook stood at Rs 4,90,900 crores versus 4,12,600 crores in Q1 FY24, up 19% YoY (and 3% QoQ). 90% of the total order book comes from infrastructure and energy. Slow moving orders are less than 1% of the total order book.

International orders comprised 46% of the total order inflow during the quarter. Of the international order book(38% of the total order book), 92% are from the Middle East, 1% from Africa, and the remaining 7% from Southeast Asia. Of the domestic order book, 14% orders are from the Central Government, 28% are from the state government, 37% are from public sector enterprises, and 21% are from the private sector.

C) Segmental results: Following are the detailed segmental results:

1. Infrastructure Project Segment (48.8% of revenues):

a) Segmental revenues stood at Rs 26,908 crores, up 22% YoY. EBITDA margins stood at 5.8% versus 5.1% YoY due to cost savings.

B) Order inflows during the quarter stood at Rs 40,053 crore, flat YoY. International orders constituted 49% of the total order inflow during the quarter.

2. Energy Projects Segment (15.41% of revenues):

a) Segmental revenues stood at Rs 8,495 crores, up 27% YoY aided by ramp-up in international projects in the hydrocarbon business. EBITDA margins stood at 8.7% versus 9.1% YoY. However, margins here would be increasing going forward. Hydrocarbon margins were affected due to stage of execution.

B) Order inflows during the quarter stood at Rs 8,792 crores, up 21% YoY. International orders constituted 22% of the total order inflow during the quarter.

C) With regards to nuclear power projects, the company has full scale capability in this segment having worked with the NPCIL across most of their nuclear power plant installations across the country.

3. Hi-Tech Manufacturing Segment (3.34% of revenues):

a) Segmental revenues stood at Rs 1,845 crores, up 4% YoY. EBITDA margins stood at 17.4% versus 16.8% YoY.

B) Order inflows during the quarter stood at Rs 3,677 crores, up 100%+ YoY with a receipt of a high value order. Exports constituted 8% of the total order inflows.

4. IT & Technology Services Segment (20.8% of revenues):

a) Segmental revenues stood at Rs 11,505 crores, up 6% YoY due to subdued global macro-outlook which impacted discretionary spend. The EBITDA margin for the segment stood at 20% versus 20.6% YoY.

B) The share of this segment in consolidated revenues and operating profit in FY24 stood at 20% and 34% respectively. This segment is a high-margin and less capital-intensive business than the EPC segment, resulting in higher ROCE.

5. Others segment (2.5% of revenues):

a) The others segment comprises of (a) Realty (b) Industrial Valves (c) Construction Equipment & Mining Machinery and (d) Rubber Processing Machinery.

B) Segmental revenues stood at Rs 1,375 crores, a de-growth of 37% YoY due to lower handover of residential units in the realty business. EBITDA margins stood at 23.4% versus 18.6% YoY.

D) Outlook: The following is the outlook provided by the management:

1. To enhance its presence in the semiconductor sector, the company has recently entered into a share purchase agreement with SiliConch Systems, a Bengaluru based chip design company.

2. With the change of government in the UK, and a hung parliament in France, the concern about the European economic recovery remains.

3. Countries in the Middle East remain focused on investments in Oil & Gas Infrastructure, Industrialization and Energy Transition.

4. The company has a total prospect pipeline of Rs 9.07 trillion for the remaining nine months of FY25 versus 12 trillion QoQ. This sharp drop is due to the decrease in the hydrocarbons prospect pipeline and some orders that the company did not secure. However, the management has maintained its 10% order inflow guidance as previously stated. A 22-23% hit rate would help meet the order inflow guidance.

5. The company is pursuing EPC opportunities in the Middle East in the oil to chemicals space where investments would be made by the clients.

6. The company has an order book of Rs 5,000 crores in the thermal power business which it will execute, but it will get repurposed to gas-based plants over a period of time. Also, the company has ventured into the offshore wind business and secured the first order. With respect to the green hydrogen, the company will bid for the IOCL tender through its JV with IOCL only.

7. The management aims to maintain a slight improvement in the margin momentum. It has given 8.2% P&M margin guidance for FY25.

8. Over the next 3 years, the bridge from 15% to 18% ROE will be filled through:

-1% from breakeven in the Hyderabad Metro which is currently making losses

-1% from improving margins in the P&M segment

-1% on account of higher payout to shareholders (will now have to evaluate buyback)

9. With regards to the Hyderabad Metro, Rs 2,100 crores are yet to be received from the government.

10. On domestic solar EPC, the company is less aggressive on winning the bids as project size in international geographies is larger. The company is getting traction domestically in the pumped storage project space.

11. With regards to an uptick in domestic revenues, H2 will make up for the lion’s share.

12. Capex for the year would be around Rs 4,000 crores. As of FY24, the company had cash and cash equivalents of Rs 33,200 crores excluding financial services business. And as per CRISIL, the company will earn net cash of Rs 10,000 crores in FY25

E) Key risks: Here are some of the risks that the company faces:

1. All international projects are fixed-price contracts. Volatility in input prices or delays in execution could hurt margins.

2. Losses in the Hyderabad metro remain a key monitorable.

Company Profile: The company has 17 manufacturing sites with presence in 100+ countries, 500 CDMO customers, 6000+ CHG hospitals and 180k ICH hospitals. As of FY24, the geographical revenue diversification is as follows: North America-41%, Europe-25%, India-20%, Japan-4%, Others-10%.

a) Q1 FY25 results: The company’s Q1 FY25 revenue from operations stood at Rs 1951 crores, up 12% YoY. EBITDA stood at Rs 224 crores, up 31% YoY, whereas EBITDA margins stood at 11% versus 10% YoY driven by operating leverage, cost optimization, and superior revenue mix… Net loss stood at Rs 89 crores versus 99 crores YoY. The company successfully closed the USFDA inspection at the Lexington facility with zero observations. As per CARE ratings, the company’s business intensity (revenue from operations divided by sum of net worth and debt) is expected to improve to 0.85x in FY26 versus 0.6-0.65x in the last three years.

B) Segmental Performance: Following is the detailed segmental performance overview of the company’s business:

CDMO Business (54% of revenues):

1. This segment’s revenues grew 18% YoY.

2. The business continues to witness steady order inflow momentum, particularly for on-patent commercial manufacturing. Management is also seeing early signs of a pick-up in biotech funding with increase in customer enquiries and visits, especially for differentiated offerings.

3. Profitability improved due to healthy revenue growth, better business mix and cost optimization initiatives. The company is also seeing YoY improvement in demand for its generic APIs.

4. Future investments will be geared towards differentiated offerings in ADC, peptides, and on-patent API development and manufacturing.

5. CDMO segment EBITDA margins have improved from 10% in FY23 to 15% in FY24. With around 34% of development revenue from phase III molecules, there is a high probability of these transitioning to product registration and commercial production. Also, 50% of the revenues came from innovation-related work and 64% revenues come from big pharma and emerging pharma. This provides visibility and stability on sales increasing by 10-15% in the near term and improvement in EBITDA margins by 100-200 bps.

6. In FY24, five of the company’s manufacturing facilities which contribute to over half of the CDMO revenues successfully cleared the USFDA inspection.

Complex Hospital Generics (32.3% of revenues):

1. This segment’s revenues grew 2% YoY.

2. The company saw robust demand for Sevoflurance (80% of the global IA market) and Isoflurane in emerging markets like Asia, Europe and RoW, which was partly offset by lower pricing in Sevoflurane in the US. 67% of FY24 CHG revenues came from inhalation anesthesia products and 51% came from the USA.

3. The company is undertaking capacity expansion in the inhalation anesthesia to meet the growing demand. The expected commercialization is in FY26.

4. The growth in the intrathecal portfolio (15% of FY24 CHG revenues) is led by new customer conversion. The company continues to command a 70% market share in intrathecal baclofen in the USA.

5. The company is also investing in portfolio expansion by developing specialty products and signing-in new licensing deals. It has a current pipeline of 24 new products which are at various stages of development and have an addressable market of $2 billion.

India Consumer Healthcare (13.5% of revenues):

1. This segment’s revenue grew 10% YoY.

2. The company added 7 new products and 10 new SKUs in its portfolio in Q1 FY25.

3. Power brands grew 19% YoY in Q1 FY25 and contributed 48% of ICH sales.

4. The company looks to widen its reach across general trade and is also strengthening its presence in alternate channels of distribution.

5. Profitability margins in this segment are in the low single digits. With the increase in sales, CARE ratings expect profitability margins to improve going forward.

C) Debt & Capex: The company’s capex plans for FY25 stand to the tune of Rs 650-750 crores, which would be majorly debt funded. The debt obligations for FY25 stand at Rs 900 crores and the company has prepaid Rs 200 crores worth of NCDs in Q1 FY25. The company has cash and liquid balances of Rs 500-600 crores as of FY24. The company’s net debt-to-EBITDA stood at 2.8x versus 2.9x QoQ.

D) Management Commentary: The following is the management commentary post its Q1 FY25 results:

1. With respect to the profitability in the CDMO business, the management intends to increase it over the medium term through increased capacity utilization and higher contribution from differentiated offerings and innovation-related work.

2. Recent changes in regulations, along with the needs of supply chain diversification are expected to provide medium- to long-term growth opportunities for the CDMO business.

3. In the CHG segment, the company is looking to build a pipeline of limited competition specialty products through investments in R&D and in-house product development capabilities.

4. For FY25, the management has guided for early teens increase in revenue and EBITDA with a meaningful improvement in PAT.

5. The management is seeing early signs of customer enquiries due to the effect of the US BioSecure Act, which aims to source low-cost generic medicines from companies maintaining high quality standards and also encourage R&D on new innovator drugs.

6. With regards to cashflows, the Indian Consumer Healthcare business funds itself, whereas investments in the CDMO and Complex Hospital Generics segment will be managed through internal accruals.

7. In the Complex Hospital Generics business, the company has 5 products approved and 17 are under various stages of approval.

E) Monitorable risks: Here are the key monitorable with respect to the company:

1. Although the company has a clear track record with respect to successfully clearing USFDA inspections, regulatory risk in this industry remains.

2. The company only hedges 45% of its net foreign currency exposures through forward contracts as a part of its hedging policy.

3. Raw material pricing remains a risk which was witnessed in FY22 and FY23 financials leading to moderation in operating margins.

4. The company’s revenues and EBITDA still remain skewed towards H2 of the year. In FY24, 55% of the revenue and 65% of the EBITDA for the full year was earned in H2 FY24.

5. In the CHG business, Sevoflurance constitutes 67% of the total segmental revenues. However, the company is working on reducing this dependence.