Fineotex Chemicals Q3 2022 Concall Highlights

Operational Highlights 

  • Q3 results were beyond management expectations. Revenue increased by 33% from the previous quarter. EBITDA grew by 70%. 22-23% EBITDA margins are sustainable in future
  • Reason for margin contractions in  previous quarters
  • Spending on certification from different institutes. Recently received Eco-passport certification from Hohenstein Institute, Germany
  • Increase of technology personnel by 75%
  • In the textile industry, the order takes 2-3 quarters to be approved by the customer. thus higher number of approvals will lead to higher margins
  • Performance chemicals contributed 95% of revenues
  • Even after high freight, power and gas cost, the company delivered healthy growth in margins

Revenue contribution from

  • Top 10 Products: 20%
  • Top 10 Raw materials (expense): 22-25%
  • Top 10 Customers: 36%
  • Raw material contribution won’t change even after capex
  • Exports in quarter is 43% of revenues
  • 5-10% contribution from Ambernath plant. Q4 revenues will be highly driven from this facility
  • Capacity utilisation at 70% (excluding Ambernath facility)
  • The company has premium customers in every substrate

Business Strategy

  • Focus on product diversification and solutions in textile industry
  • New product mix is revamped and working on sustainable solutions
  • Increase wallet share with existing customers and enter new geographies 
  • Higher number of products will lead to higher asset turnover for new capex
  • Products manufactured have high grade of technology
  • Not difficult to achieve ₹750 Cr in three years
  • Recurring revenues from customers is high as products from 2008 are still being demanded 
  • Offering new product solutions to existing customers. Customer benefits on their cost management from these products

Capex 

  • The new ambernath facility started in November 
  • Asset turnover for capex will be 7-8x minimum
  • Revenue contribution from Ambernath facility is expected around ₹350 Cr
  • Expecting to have capex after utilisation of Ambernath facility

Industry outlook

  • Demand for technology is higher for products like antimicrobials, dust repellents, water repellents and perspiration absorption.
  • The industry has witnessed exponential growth from 2020
  • The incremental prices are neglected by consumer has the contribution of product in final cost is 0.15%
  • Unlike other chemistry, the customer is not bothered with high purity or activity, the molecule should serve the purpose in the final applications. 
  • Higher switching cost to customers as the reward to risk ratio to approve new suppliers is very low. (any changes in molecule could hamper the final textile product)

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