Skip to player
Skip to main content
Skip to footer
Search
Connect
Watch fullscreen
Like
Comments
Bookmark
Share
Add to Playlist
Report
Neogen Chemicals Q1 Profit Rise On Lower Tax Rate | NDTV Profit
NDTV Profit
Follow
8/12/2024
Category
🗞
News
Transcript
Display full video transcript
00:00
Welcome back to Earnings Search and company in focus today is Neogen Chemicals.
00:10
So, if you see company manufactures bromine and lithium based organic products which are
00:16
used in pharmaceutical, agriculture, chemicals and engineering industries.
00:21
Company recently came out with its Q1 FY25 numbers wherein revenue was up almost 9 percent
00:28
at 180 crores versus 165 crores last year and EBITDA was up almost 9.7 percent at rupees
00:35
30 crore versus 28 crore last year and margin was flat at 17 percent.
00:42
If you see the net profit, net profit was up 17 percent at rupees 11 crore versus you
00:49
know 9 crore last year.
00:51
Company is into companies entering into battery chemicals which is the growth prospect for
00:57
the company and we are going to speak with the management who is Mr. Harin Karani.
01:04
So, if you see the quarter was actually a decent quarter and the company is doing huge
01:13
capex when it comes to battery chemicals.
01:16
Also their CSM business that is custom synthesis business is also doing really good.
01:21
Company has also entered into semiconductor business.
01:25
If you see margins are expected, margins are flat at 17 percent, but in FY25 margins
01:31
may be around 17 to 18 percent, but by FY26, 27 margin may increase due to the increase
01:37
of battery chemical business.
01:39
Also companies doing almost 15 crores of capex, we need to see how this company is going to
01:45
fund their capex plans and also the battery chemicals is actually very in crucial stage
01:52
and lot of discussions are going on, a long term discussions are going on wherein they
01:58
are going to enter into long term discussion with many other companies.
02:02
Well, to speak about the numbers and the growth outlook for the company, I am here joined
02:08
by Dr. Harin Karani who is MD of Neogen Chemicals.
02:13
Welcome to the show.
02:14
Hi.
02:15
Welcome.
02:16
Thank you for having me here.
02:17
Well, Mr. Karani, how is the quarter, the growth that we are seeing, was the growth
02:22
volume driven or as we have seen the prices continue to fall and what's your outlook on
02:28
pricing trends going forward?
02:31
So the majority of the growth that you have seen is volume driven.
02:35
In fact, the growth was even slightly, volume growth was even higher than the value growth
02:41
that we are seeing and this is mainly because the lithium prices were still higher one year
02:46
ago.
02:47
So when we are looking on quarter on quarter performance, the lithium price was still higher.
02:51
I think we have seen mostly the lowest prices of lithium.
02:55
I mean, now even if there's a correction, it will be like 5%, 10% and then eventually
03:00
still in over a two year term, we expect the prices should go higher on a more stable kind
03:07
of basis because the prices today we believe are a little bit on the lower side.
03:12
Similarly, I think bromine also, it's almost reached its bottom and we have seen the bromine
03:17
raw metal prices also increased slightly.
03:20
And overall, if we think of our competitors, like especially in the pharma and agro business,
03:26
you again see the intermediate prices reach their bottom now stabilized at that level
03:32
or slightly improve on that.
03:36
In terms of industry, we have seen demand in pharma has recovered quite well.
03:40
You also see in other industries like flavor, fragrance, we have a bit of semiconductor.
03:46
These also started contributing to our business.
03:50
The organolithium compounds contribution has also increased.
03:54
We expect by Q2 this year, we will be also hitting full utilization levels there.
03:59
And we are also planning some small capacity increase there.
04:02
And we just made a start with the battery chemicals revenue.
04:07
It was the first quarter where there was some meaningful contribution in single digit crores,
04:12
but it started contributing now.
04:14
Well, then let's talk about your greenfield battery facility CapEx.
04:18
Are we on track on commissioning the facility by FY26 and aligning with the upcoming battery
04:24
capacities in India?
04:26
Yeah.
04:26
So if you think of the capacity increase we are doing, the greenfield which we are doing
04:30
in Pakhajan, that can support up to 30 gigawatt hour of electrolyte cell production on the
04:39
electrolyte and around 50 odd gigawatt hours of electrolyte salt together, the existing
04:46
as well as the new site together.
04:47
So that remains on track.
04:49
We started construction work there.
04:51
And in the second half of FY26, we are expecting that to come online.
04:56
In addition to that, in our existing Dahej site, in last quarter, trial productions were
05:03
ongoing.
05:04
So we slowly phase-wise completed this.
05:07
So we started small quantity electrolyte salt, like around 200 metric tons of electrolyte
05:15
salt and around 200 metric tons of electrolytes.
05:17
So that capacity is already online.
05:19
We made trial productions to customers and we are awaiting customer feedbacks.
05:24
I think we should get approval in Q2 from some of them.
05:28
And from Q3, Q4 onwards, they should start contributing meaningfully.
05:33
And based on the projections which several customers have shared with us, this brownfield
05:38
capacity also we are increasing, especially on the electrolyte salt for the international
05:42
market.
05:43
We are increasing from current around 400 metric tons to 1,500 metric tons.
05:51
So it's only 2,500 metric tons by, let's say, March or June 2025.
05:57
So I think work on that is also ongoing.
06:00
And we remain on track to basically deliver that.
06:02
Well, have you started getting orders in battery manufacturing considering the battery manufacturers
06:07
started production this year?
06:09
Are you engaging in some kind of long-term electrolyte supply contract discussions?
06:15
The discussions are on.
06:17
We are also supplying to them or working closely with them to fine-tune the product because
06:22
each electrolyte is customized as per customer need.
06:26
So some of the customers have finalized the design.
06:28
And based on that, they have taken trial production.
06:31
So almost 3 to 4 customers have already taken electrolytes from our commercial plant.
06:37
So this was as per the finalized recipe which they wanted.
06:41
And now they are doing the trials at a larger scale at their end.
06:45
Once these trials are successful, we can discuss on a long-term contract with them,
06:49
as well as there are other 2-3 manufacturers who are planning to come online
06:54
little later in the year or next year.
06:56
With them also, we are discussing on their requirement, first understanding their requirement,
07:01
developing a product which meets that.
07:03
And then in parallel, also discuss commercial.
07:07
So during our conference call, as we indicated that we hope in the next 1-1.5 years,
07:13
so in the current and next financial year,
07:15
we should start seeing long-term contracts for electrolyte supplies come in.
07:19
And they will be the basis on the electrolyte,
07:24
the bigger greenfield electrolyte plant which is coming online.
07:28
So we will look forward to that.
07:30
And let's say if everything goes well as per projection,
07:35
the contracts that we sign will basically also determine
07:39
if we need to increase capacity beyond what we have.
07:42
Well, how will your margin picture look like
07:44
considering your battery chemical business and your base business?
07:50
In the battery chemical business,
07:54
the prices of lithium and many raw materials are fluctuating a lot.
07:58
So this is a business that we expect to do based on ROC concept.
08:01
So we feel with the amount of risk and the knowledge
08:05
and the complexity of the molecules what we are making,
08:08
we are expecting a 20% ROC.
08:11
On an EBITDA basis, on a stable lithium price, it comes down to around 16-17%.
08:17
It will also depend on the mix that how much is coming from salt
08:20
and how much is coming from electrolyte.
08:22
But more or less, let's say around 16 odd percent EBITDA margin
08:26
and around 20% ROC is what we are expecting on the battery business.
08:32
On the fine chemical, the agro and fine agro pharma,
08:38
organic and our non-battery lithium business,
08:41
that business traditionally we had said is 18.5% plus or minus 1% EBITDA business.
08:47
And as we get more into CSM, as we do more innovation in the complex molecule,
08:55
then we can hope to increase this beyond 20%.
08:58
So currently, because of the market challenge,
09:01
even this business will do around 16-17%.
09:04
But long term, once a little bit business and demand has recovered,
09:08
we expect it to be between 18-20% at least in the short term.
09:12
And then if you're able to do a good job, add value to customers,
09:16
then we'll earn the right to have EBITDAs beyond 20%.
09:21
Well, in FY25, can we see EBITDA margin between 16-18% only in FY25?
09:29
That's the hope.
09:29
So we started at a 17% quarter and everything,
09:33
the prices, even if there's a correction, it will be on an increase.
09:37
We don't expect sudden decrease.
09:38
So raw material-based corrections also not much.
09:41
So we hope with the increasing demand, increasing utilization,
09:45
more positive contribution coming from batteries
09:49
will basically target a 16-18% EBITDA margins for the current quarter.
09:55
Well, you mentioned that you're going to do around 900 crores,
10:01
2000 crores by FY26 in the press release.
10:04
Now, I'm assuming this is on the standalone basis.
10:07
So overall, considering your battery business, your base business,
10:12
what is the expectations in FY25?
10:14
What number you are targeting in terms of revenue in FY25?
10:19
So FY25, for our base business, we had said last year, we did around 680 crores.
10:26
Like we expect around 750-800 crores on the base business
10:30
and around 750 to around 100 crores for our battery business.
10:37
So together, let's say somewhere closer to around 800 odd crores
10:41
is what we would target.
10:43
Again, it will be more heavy on the second half
10:46
when we'll see some more of this recovery's help
10:50
as well as the battery business contribution also will be more in the second half.
10:53
So that's what we are looking at 800 crores around that,
10:58
at least from what we can see today.
11:00
If the agrochemical industry improves,
11:02
we can have better performance than that in the current year.
11:05
And for the next year, as we indicated,
11:08
952,000 crores just coming from the base business,
11:12
plus the battery business,
11:13
the existing capacities itself would contribute 250 crores.
11:17
So we are looking at somewhere around 1200 odd crores at minimum,
11:22
plus as the new capacities in Dahej come online,
11:26
as well as the Greenfield will come online in second half.
11:29
So depending on exactly when these capacities come online
11:32
and the customer approvals of these facilities,
11:36
we can expect additional business on top of this 1250 for FY26.
11:43
Well, last question from my side is,
11:45
you are entering into semiconductor business also, I believe.
11:49
So what are their project products exactly?
11:52
And is it an export opportunity or domestic one?
11:57
Yeah, so currently it's an export opportunity.
11:59
And what we can say,
12:00
we are a tier two supplier to the semiconductor industry,
12:04
wherein we will make some chemicals,
12:05
which will then be used by some other chemical companies in Japan and Korea
12:11
and US, who will then make the final chemical going to the semiconductor makers.
12:17
So 2-3, we have seen some application of the organolithium compound,
12:22
then we have done some specialty gas,
12:25
and some of our existing Bromo derivative,
12:27
but a much higher purity of these will also find applications in this.
12:31
So we've found like 4-5 molecules already.
12:34
We are also working with our customers
12:40
for the approvals and then slowly increase the quantity of this.
12:45
I think we have already made a start.
12:49
In current year, it will be about a few 10s of crores kind of a business.
12:54
But let's say as we go into FY26, FY27,
12:58
we will basically be able to explore more properly
13:03
the revenue contribution which can come from this business.
13:06
Well, thank you so much, Mr. Kanhani for answering our questions
13:09
and all the best for the future.
13:11
Thank you so much for having me.
13:13
Have a great day.
13:14
Well, that's all the time we have on the show.
13:16
Stay tuned to NTB Profit.
Recommended
9:29
|
Up next
Apollo Micro Systems Aiming For Rs 1,000 Crore Revenue In Next Two Years | NDTV Profit
NDTV Profit
10/28/2024
10:42
Coking Coal Costs To Go Down In Ongoing Quarter, Says JSW Steel | NDTV Profit
NDTV Profit
10/28/2024
7:20
Adani Acquisition Is 'Win-Win Situation', Says ITD Cementation CFO | NDTV Profit
NDTV Profit
10/28/2024
7:25
What Are The Key Trends In FMCG Earnings Indicating?
NDTV Profit
10/25/2024
2:45
Justice Sanjiv Khanna To Be India's Next CJI After Justice Chandrachud
NDTV Profit
10/25/2024
10:10
Russian Discounts On Crude Oil Imports Declining: Chennai Petroleum MD | NDTV Profit
NDTV Profit
10/24/2024
13:36
Birlasoft Expects Margins Hit In Q3 Due To Seasonal Impact | NDTV Profit
NDTV Profit
10/24/2024
11:50
Metro Brands CEO Explains How Tie Up With Nykaa 'Is A Unique One' | NDTV Profit
NDTV Profit
10/24/2024
6:57
Gurugram's Golf Course Road Is Set For 'Massive Price Action': Godrej Properties CEO | NDTV Profit
NDTV Profit
10/24/2024
13:13
Amber Enterprises Aims To Double Revenue From Railway Business In Three Years | NDTV Profit
NDTV Profit
10/24/2024
9:02
KPIT Tech MD Expects Growth To Come From US-Based OEMs | NDTV Profit
NDTV Profit
10/24/2024
24:55
What's Leading The Cash Buildup In PPFAS Flexi Cap? | All You Need To Know On The Mutual Fund Show
NDTV Profit
10/24/2024
7:43
Union Bank's Q2 Success: Nitesh Ranjan On Profit Growth & Rising Corporate Demand | Talking Point
NDTV Profit
10/24/2024
11:08
How Did Key BFSI Players Perform In Q2? Find Out Here | NDTV Profit
NDTV Profit
10/24/2024
9:02
What's Next For Persistent Systems? CEO Sandeep Kalra Discusses AI Growth & Strategic Plans For FY25
NDTV Profit
10/24/2024
3:48
Suraj Estate Developers Raise ₹343 Crore For Land Acquisitions | NDTV Profit
NDTV Profit
10/24/2024
28:00
Modi-Xi Meeting: A New Era For India-China Relations & Global Conflict Resolution? | The Big Story
NDTV Profit
10/23/2024
8:58
Tips Music Set For A Pitch Perfect FY25? | NDTV Profit
NDTV Profit
10/22/2024
15:12
Passive Strategy For Long-Term: Why It Works? | All You Need To Know On The Mutual Fund Show
NDTV Profit
10/22/2024
10:42
Mixed Q2FY25 Earnings For Tata Communications | NDTV Profit
NDTV Profit
10/18/2024
9:29
Havells India: Outlook On Festive Season | NDTV Profit
NDTV Profit
10/18/2024
5:53
Natural Gas Allocation Slashed, City Gas Distributors Face Rising Pressure | NDTV Profit
NDTV Profit
10/18/2024
10:11
Jindal Stainless: White Goods And Two-Wheelers To Outperform | NDTV Profit
NDTV Profit
10/18/2024
28:31
What People Don't Tell You About Wealth Creation | Moneywise
NDTV Profit
10/18/2024
9:27
RBI Bars 4 Firms From Disbursing Loans A Week After Warning NBFCs
NDTV Profit
10/18/2024