Neogen Chemicals Q3 2022 Concall Highlights

Operational Highlights

• Highest quarterly revenue of ₹132.6 Cr, growth of 56% YoY
• EBITDA grew by 41% YoY to ₹23.8 Cr
• robust revenue gains driven by higher contribution from recently commissioned phase I & II expansions at Dahej SEZ
• EBITDA performance includes transient cost impact related to Phase I & II expansion. This will be neutralised once the new plants operate at optimal utilisation levels.
• Mahape and Vadodara continue at high utilisation levels.
• Domestic revenue contribution stood at 55%, rest 45% were export oriented
• Demand for Lithium-based chemicals tends to be strong in Q4 as demand from the HVAC segment.

Business strategy

• Aggregate revenue target of ₹750 Cr for FY24 including contribution of new lithium segment.
• Phase 1 capex is used more on agro intermediates and phase 2 has pharma molecules and bromine derivatives
• September FY23 should see full utilisation and revenue guidance of ₹650-₹675 Cr by Q2FY23 is anticipated
• FY24 guidance may change depending on existing performance
• 42%( +/- 2%) gross margins level are sustainable 
• Lithium carbonate  prices went up to $15-$18/ kg and are expected to rise in the next few quarters. Most of the incremental prices are passed on to customers.
• Demand for electrolytes will be more on the renewable energy storages  and hydrogen production facility
• Different batteries have different cathode chemistry, this determines the composition of electrolytes and solvent in the battery. For every consumer the product is similar but not identical
• Also looking for opportunities in lithium based battery additives
• Electrolyte prices are different in Japan, Europe and China.

Segmental performance

• 79% of revenues for Q3FY22 were contributed from the organic segment with growth of 53% YoY
• Rest 21% is contributed from the inorganic with growth of 70% YoY
• Early stage projects in CSM is undertaken 

Capex

• New lithium capex is expected to be commercialised by Sep FY23
• The volumes at Dahej are ramping up for phase 1 and phase 2 expansions
• Three more capex under consideration after the lithium facility
•  Large capex for electrolytes at karkhadi plant (depending on PLI scheme benefits and customer response for electrolyte products) 15-18 months is required to setup the facility
• Lithium salts at Dahej (decision to be considered post June FY23 and construction should be completed within ) 10-12 months  is required to setup the facility
•  Increase in organic capacity (decision to be considered by Sep-March period FY23) 12-15 months  is required to setup the organic MPP
• Expecting ₹50-₹100 Cr capex in the first phase.