DMCC Speciality Chemicals Ltd Q2 FY22 Earnings Call Analysis
Revenue, margin, capex, fundraise and order book outlook from management commentary.
Management growth scorecard
Revenue
Category 3
Margin
Category 3
Fundraise
No
Order
N/A
Capex
Yes
1 of 4 growth signals are positive — mixed outlook.
Full analysisRevenue guidance
Category 3- The company expects growth driven primarily by specialty chemicals with better visibility and long-term contracts.
- Bulk chemicals, comprising about one-third of the business, have limited price pass-through, leading to stagnant or slight volume growth.
- New CAPEX projects (multipurpose plant, debottlenecking, sulphuric acid plant) expected to complete by FY22 end, with ramp-up likely in FY23.
- Post completion of current CAPEX, new rounds of CAPEX focusing on specialty chemicals with better margins are planned, possibly starting FY24.
- Market demand shows good pull and positive traction, especially in specialty chemicals like amides and sulfones.
- Capacity utilization in bulk chemicals plants (acid plants) expected at 70-90%.
- Overall, growth in volumes expected once plants ramp up, with ongoing product development and market expansion efforts.
See what DMCC Speciality Chemicals Ltd management said on margin guidance — free account, 30 seconds.
Fundraise plans
No- Currently, the company is not willing to take on new projects or investments until the ongoing CAPEX cycle is complete (expected by April 2022).
- They plan to decide on new investments after stabilizing current CAPEX and generating cash flows, likely post-April 2022 or later.
- There is no mention of immediate fundraising through debt or equity.
- Future investments will depend on government policy, market conditions, and performance of existing projects.
- Emphasis is on internal cash generation to fund new specialty chemical projects rather than external fundraising at present.
See what DMCC Speciality Chemicals Ltd management said on order book — free account, 30 seconds.
Capex plans
Yes- Current CAPEX includes five projects to be completed by end of FY22, including a sulphuric acid plant at Dahej, specialty chemical plants, and debottlenecking at Roha.
- The sulphuric acid plant (₹50 crores CAPEX) to be commissioned in Q3 FY22.
- Multipurpose plant and intermediates plant at Dahej also underway with asset turns of 1.5–2.5x for specialty chemicals.
- No further CAPEX planned until current projects stabilize and generate cash flows; next CAPEX round likely post-April 2022.
- Future CAPEX will focus more on specialty chemicals, prioritizing better margins over bulk chemicals.
- Boric acid plant investment under consideration only if government policy remains controlled; otherwise, no immediate plans.
- No investment commitment on sulfones dedicated plant currently; R&D continues.
- Company is cautious on new investments pending market and government policy clarity.
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Margin guidance
Category 3- Earnings growth is expected post-completion of current CAPEX cycle around April 2022, which includes bulk chemicals (sulphuric acid plant) and specialty chemicals projects.
- Post-CAPEX stabilization, the company expects higher cash profits enabling further specialty chemical projects with better margins.
- Specialty chemicals have better price pass-through abilities, supporting margin improvement.
- Bulk chemicals faced margin contraction due to raw material price increase not fully passed on yet; improvement expected in future quarters.
- New products like amides and sulfones are gaining traction, contributing to volume and profit growth.
- ROCE hurdles for new projects are set around 30%, indicating focus on profitable growth.
- Capacity utilization of new plants is anticipated to ramp up gradually in FY23.
- Boric acid plant CAPEX decision pending, depending on government policies and market conditions, which could augment downstream volumes and profitability.
Order book
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