Aimco Pesticides LtdQ2 FY20Fertilizers & Agrochemicals

Aimco Pesticides Ltd

Q2 FY20 Earnings Call Analysis

Management growth scorecard

Revenue

Category 2

Margin

Category 1

Fundraise

Yes

Order

N/A

Capex

Yes

3 of 4 growth signals are positive.

Full analysis

Revenue guidance

Category 2

→Current capacity allows for 25-30% growth through de-bottlenecking investments without major CAPEX.
→Additional CAPEX of around Rs. 4-5 crore planned to increase capacity by 25-30%.
→Beyond that, new plant investments planned to support new products like Bifenthrin and two others in the pipeline, expected to commercialize in 2-3 years.
→Bifenthrin volumes expected to scale up materially once registrations in Americas (North & South) are approved.
→Focus shifting towards higher margin Technical and Branded Formulations, reducing bulk B2B sales.
→Exports currently ~60% of revenue, expected to remain stable with potential 5-7% variation.
→Target to achieve ~Rs. 100 crore turnover in Technicals within 2 years.
→Overall vision is consistent substantial growth, improved profit margins, and becoming a large production-based company with new generic molecules.

Margin guidance

Category 1

→Expected 25-30% growth from current capacity after de-bottlenecking, without major CAPEX.
→New plant investment planned for manufacturing two new products, which will drive further topline growth.
→New product Bifenthrin has high margin potential, expected operating margins better than Chlorpyrifos, safely above 10%.
→Two more products (an insecticide and a herbicide) are in pipeline, with commercialization expected in 2-3 years.
→Gross margins expected to improve due to shift from bulk formulated product to higher-margin technical and branded formulations.
→Operating margins projected to rise above current 10%, aided by new products and better market conditions.
→Capacity expansion and registration approvals critical for scaling up sales and profitability in exports.
→The company targets consistent growth and margin improvement over next 3-5 years, focusing on new molecules and export markets.

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Fundraise plans

Yes

- The company raised Rs. 4 crore term loan and Rs. 6 crore working capital loan recently to enhance working capital and support capital investment. - The promoter shareholding was pledged as security for this debt. - There is no indication of immediate further fundraising through debt or equity mentioned. - Future capital expenditures are planned, including about Rs. 2.5 crore on plant de-bottlenecking and Rs. 1.5 crore on effluent treatment, and a new plant investment starting next year for new products. - No explicit mention of additional fundraising for these future CAPEX; current funds and working capital loans appear to cover these. - The company plans to manage working capital prudently and does not intend to carry promoter pledges long-term. In summary, the company has recently taken some debt but no clear plans for new fundraising through debt or equity were stated for the near future.

Order book

→The company is currently in the development phase for new products and capacities.
→They have started production of a new product, Bifenthrin, but volume scale-up depends on awaiting registration approvals.
→Registrations are underway in North and South America; volumes will build up once approvals are received.
→The company anticipates 25-30% growth from current capacity with ongoing de-bottlenecking investments.
→For further growth beyond 30%, new manufacturing capacity investments are planned.
→Contract manufacturing discussions are ongoing, but no capacity available currently; new facility would require separate CAPEX (~Rs. 20-25 crore).
→The order book is thus linked closely to registration status and market conditions, with expected growth driven by new products' commercialization and capacity expansion.

Capex plans

Yes

→Currently undertaking CAPEX of about Rs. 4-5 crore: Rs. 2.5 crore for plant debottlenecking and Rs. 1.5 crore for effluent treatment plant to increase capacity by 25-30% without new plant investment.
→Future CAPEX planned to set up a new plant within the same premises for manufacturing two new products; work on this to start sometime next year.
→Considering new manufacturing capacities to scale beyond 25-30% growth; currently in development phase.
→Potential Rs. 20-25 crore large CAPEX for contract manufacturing if undertaken, but requires new facility.
→Strategic focus on expanding technical product sales and branded formulations with new products in pipeline.
→Actively investing upfront in product registrations required for exports across various countries.

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