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)