Himadri Speciality Chemical Ltd Q3 FY17 Earnings Call Analysis
Revenue, margin, capex, fundraise and order book outlook from management commentary.
Management growth scorecard
Revenue
Category 2
Margin
Category 3
Fundraise
No
Order
N/A
Capex
No
0 of 4 growth signals are positive — mixed outlook.
Full analysisRevenue guidance
Category 2- Volumes grew 22% YoY from 79,182 tons in Q3 FY16 to 96,337 tons in Q3 FY17, driven mainly by increased demand from the aluminum industry.
- Capacity utilization for coal tar pitch is expected to grow from current levels to up to 125%.
- Vedanta’s aluminum smelter ramp-up is a key growth driver; currently operating at 35-40% capacity with plans to reach 75-80% in four quarters, potentially increasing volumes by 20-25%.
- BALCO's smelter running at 60-70%, targeting full capacity soon, adding about 13,000 tons per year demand.
- Overall volume growth will primarily come from coal tar pitch as carbon black is near full capacity.
- The company anticipates revenue growth aligned with volume ramp-up and product mix focusing on higher-value and niche products.
- No major CAPEX planned; growth expected from existing capacity expansion and increased demand.
See what Himadri Speciality Chemical Ltd management said on margin guidance — free account, 30 seconds.
Fundraise plans
No- No warrants outstanding; no further chance of equity increase (Anurag Choudhary, Page 14).
- No convertible instruments on the balance sheet; previous FCCB debt repaid in April last year (Page 13).
- No big CAPEX planned; only small CAPEX and maintenance CAPEX in range of Rs. 12-15 crores debited to P&L (Page 13).
- Focus on debt repayment using generated cash flows; plan to reduce debt by Rs. 100-150 crores next year, despite scheduled repayment of Rs. 50-60 crores (Page 13).
- Average cost of borrowing currently at 8.5%; expected to reduce by 100 to 150 basis points due to interest cost reduction by banks (Page 13).
- No new fundraising through equity or debt mentioned; emphasis on consolidating business and reducing existing debt (Pages 12-14).
See what Himadri Speciality Chemical Ltd management said on order book — free account, 30 seconds.
Capex plans
No- No major CAPEX plans currently; focus is on stabilizing and consolidating existing business.
- Maintenance CAPEX is in the range of Rs. 12-15 crores, charged to P&L only.
- Small CAPEX may occur but no big CAPEX planned.
- Existing distillation capacity of 400,000 tons can be scaled up to 520,000-525,000 tons without new CAPEX.
- Growth expected primarily from increased utilization, especially in coal tar pitch segment, not from new capacity.
- No additional CAPEX planned to drive volume growth; current capacity utilization allows some ramp-up (e.g., up to 125% in some units).
- Company is investing in working capital reduction and debt repayment rather than capital expenditure.
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Margin guidance
Category 3- Volumes expected to grow by 20-25% over next four quarters driven by ramp-up in aluminium capacities, especially Vedanta’s smelter operating capacity increasing from 35-40% to 75-80%.
- Capacity utilization has potential to increase up to 125%, allowing ~25% incremental production from existing assets.
- No major CAPEX planned; growth expected from volume ramp-up and product mix optimization, focusing on higher-value and niche products.
- Margins have stabilized around 17-20%, with recent EBITDA margin at 19.2%, expected to remain strong and stable going forward.
- Reduction in financial costs expected as debt reduces; average borrowing cost anticipated to drop by 100-150 basis points from current ~8.5%.
- Forex losses presently impacting P&L expected to normalize next fiscal year, boosting reported profitability.
- Overall, continuous working capital improvement and positive operational efficiencies support earnings growth and EPS improvement.
Order book
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What Himadri Speciality Chemical Ltd's management said in earlier quarters
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