AksharChem (I) Q3 FY19 Earnings Call Analysis
Revenue, margin, capex, fundraise and order book outlook from management commentary.
Management growth scorecard
Revenue
Category 3
Margin
Category 3
Fundraise
N/A
Order
N/A
Capex
Yes
1 of 3 growth signals are positive — mixed outlook.
Full analysisRevenue guidance
Category 3- →Volumes showed growth with Q3 FY2019 at 2,355 MT versus 1,843 MT in Q3 FY2018, indicating sustained demand.
- →CPC Green capacity expanded from 1,920 MT to 2,400 MT; full utilization expected by end of FY2020.
- →Precipitated silica product commercialization expected from Q2 FY2020, with revenues starting from Q3 FY2020 in the local market.
- →H-acid capacity utilization aimed to stabilize above 50%-60% in the current quarter with further market acceptance in export markets expected over next 2-3 quarters.
- →Pigment Green expansion planned, dependent on market conditions, targeting approx. 20-25% capacity addition quarterly.
- →Overall company sales growth driven by higher volumes and better realizations; raw material prices expected to stabilize.
- →Long-term potential for increased market share from China's controlled capacity and environmental constraints.
See what AksharChem (I) management said on margin guidance — free account, 30 seconds.
Fundraise plans
- →There is no mention of any current or future fundraising through debt or equity in the provided transcript.
- →The company is focusing on preserving money within the company for business expansion rather than major investments aimed at tax savings.
- →Capex plans are primarily related to Greenfield expansion of the H-acid plant (costing around Rs. 55-60 Crores) and further expansion of Pigment Green, depending on market demand.
- →No firm investment plans beyond existing ongoing projects for FY2020 were indicated.
- →No explicit references to raising funds via debt or equity were discussed during the call.
See what AksharChem (I) management said on order book — free account, 30 seconds.
Capex plans
Yes- →Current ongoing projects:
- → - Specialty chemical product precipitated silica at Dahej, capacity 10,000 metric tonnes per annum, commercial production expected from Q2 FY2020.
- → - Pigment Green expansion completed; further expansion planned depending on market demand.
- →Future capex plans:
- → - No firm investment plans beyond current projects for FY2020, except for Pigment Green expansion.
- → - Potential for Greenfield expansion of H-acid capacity estimated to cost around Rs. 55-60 Crores.
- →Strategy:
- → - Focus on expanding H-acid capacity if market demand stabilizes.
- → - Gradual capacity utilization expected for CPC Green expansion over four quarters.
- → - Emphasis on preserving funds for business expansion rather than major tax-saving investments.
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Margin guidance
Category 3- →H-acid production issues have been resolved; normalized production and quality expected from Q4 FY2019, leading to improved margins and profits.
- →Normal EBITDA margins for core chemical business (Vinyl Sulphone and Pigment Green) expected in range of 12%-15%.
- →H-acid expected to contribute positively to both topline and bottomline from next quarter, likely breakeven at PBT level soon.
- →Capacity expansions underway:
- → - CPC Green capacity increased; full utilization expected by end of FY2020.
- → - Precipitated silica commercial production expected from Q2 FY2020 with revenue contribution starting Q3 FY2020.
- → - Potential further expansion in Pigment Green subject to market demand.
- →Effective tax rate higher due to new capital gains tax norms; tax rate expected to be sustainable.
- →Focus on preserving cash for business expansion, no major tax-saving investments planned.
- →Demand showing slight improvement starting February; overall cautious outlook but volume growth anticipated.
Order book
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