Q2 2024 Concall Notes

• Excellent volume growth, but fall in raw material price was the key reason behind the low finished goods realization. No substantial inventory loss in the quarter.

  • Recent raw material price in second half of the quarter has negated some inventory loss (observed till Mid July) – so no material inventory loss in the quarter
  • Sequential volume growth: 5%, overall growth is close to 5% QoQ and this is not just from nitrile latex growth. No volume guidance provided from management, but like to utilize the full capacity max by 3 years.
  • Export growth for Apcotex due to cost being too high for European competitors & manufacturers looking to diversify out of China

• New facilities commissioned are utilized close to 25% – 30% on yearly basis. When capacities are fully utilized for newly commissioned plants, it will generate close to 600 – 700 crore.

  • Received clearance to operate the multi-purpose Taloja facility at full capacity, at end of Q2.

• Revenue mix:

  • 70 : 30 in both volume & value terms vs 80 : 20. Exports are more towards carpets, XNB
  • End user industry mix: Latex – 55% and Rubber – 45%

• Nitrile Latex & new plant commissioned for it:

  • Top Glove (leading glow manufacturer) – Expects the prices of Nitrile latex to drop further, but management doesn’t see much room for further price drop.
  • At the moment Nitrile latex EBITDA is just close to break-even @ close to 0% and it is dragging the overall EBITDA. But EBITDA pre covid was around 14 – 15% or even more than that. But some of the current Orders are below the break-even levels, where we like to operate at least at or above break-even levels
  • Current capacity utilization is around 25 – 30%, hopefully will be able to utilize at least 90% capacity by End of the year at monthly run rate.
  • Exploring smaller Vietnam | Thailand | Sri Lanka and some new players in India, other than earlier preferred market like Malaysia

• Capex: No decisions made yet, For NBR related capex – Design is ready but waiting for EV related developments, as NBR has major application towards ICE vehicles, very much less quantity of NBR will be going towards EV vs ICE. As of now no major capex other than maintenance capex.

Note: These are some personal notes from Q2 FY 24 conference call, as per my understanding

Went through the annual report and got the feeling that these guys have not done justice to the non-promoter shareholders. The related party NCDs they deposited in, give yield of 2.5-4% p.a. which I feel is very less as compared to Bank FDs but they repeatedly state on call that they get more than market rates and they know these companies well.

The NXTDigital merger transaction also seems like a way for the promoters to sell their loss making business to a recently wealthy company. I see no synergies in their operations but they keep on insisting on it. I couldn’t get old financials of NXTDigital but as per the segment reporting note it seems it was a loss making business which got a swap ratio of 20:63. The promoters must have pocketed somewhere north of Rs 900 crores by tendering these new shares in the buyback.

Entered this stock a long time back and gained a lot from it. Recovered my cost and but it still consists a good part of my portfolio. Now will exit seeing the level of corporate governance. I was excited about the stock seeing the new buzz around AI but I believe these allocation and governance lapses will outrun the cash flow from the remaining businesses. Teklink seems like a good acquisition but can’t stay just for that.

Hi Gopi Krishna garu

Have you received your RA number from SEBI

Is anyone tracking Emerald Finance?

Dhampur Bio – promoters have bought shares from open market at Rs. 160. Last Nov also they had bought shares from market.
Company has increased cane crushing capacity (by 30%). As per concall they expect to crush 8% more cane this year. Extra capacity of 20% will help them crush cane faster and hence increase recovery (cane crushed in April/ May has low recovery).
They had commissioned pharma grade sugar plant few quarters back.
Ethanol they have postponed as margins in sugar will be higher for next 2 years. No capex no interest burden but higher margins through existing sugar capacity.
DBOL will be best performing sugar company this year.