ACUTAAS — earnings call
The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.
Prepared remarks
DIRECTOR, AMI ORGANICS LIMITED · MR. ABHISHEK PATEL – VICE PRESIDENT, STRATEGY,
MR. ABHISHEK PATEL – VICE PRESIDENT, STRATEGY,
AMI ORGANICS LIMITED · MR. BHAVIN SHAH – CHIEF FINANCIAL OFFICER, AMI
MR. BHAVIN SHAH – CHIEF FINANCIAL OFFICER, AMI
Moderator · Conference Operator
MR. KRISHANCHANDRA PARWANI – JM FINANCIAL
AMI ORGANICS LIMITED · MR. BHAVIN SHAH – CHIEF FINANCIAL OFFICER, AMI
October 29, 2024
Moderator · Conference Operator
Ladies and gentlemen, good day, and welcome to the AMI Organics Limited Q2 FY25 Earnings Conference Call hosted by JM Financial Institutional Equities.
As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes.
Should you need assistance during this conference call, please signal an operator by pressing “*”then “0” on your touchtone phone.
Please note that this conference is being recorded.
I now hand the conference over to Mr. Krishan Parwani from JM Financial.
Thank you, and over to you, sir.
Krishan Parwani
Good afternoon everyone and thank you for joining us on AMI Organics Q2 & H1 FY25
AMI ORGANICS LIMITED · MR. BHAVIN SHAH – CHIEF FINANCIAL OFFICER, AMI
October 29, 2024 Now, let me provide some perspectives on the current state of the chemical sector: From the demand side, the demand continues to improve albeit at a slower pace than what everyone had anticipated.
Speaking of various sub segments of chemical sector, some of the pockets are witnessing growth in the demand, but majority sub segments are seeing stagnant demand.
This is driven by overall slowdown in consumer spending that we all have been witnessing across the sector.
Coming to pricing, even though pricing has been stabilized, the upward movement that everyone has been anticipating is taking longer than what we expected.
Starting with pharmaceutical intermediates
The demand have been slowly improving but what is more painful is the pricing, the pricing for the generic intermediates have been at their lowest.
I strongly believe that demand will see an uptick in H1 of Calendar Year 2025 with the price slowly moving upwards.
Moving on to the battery chemicals
We are witnessing that major car makers and industry players are deferring their additional investment in EV battery capacities and related space.
I believe the big investment outlined by these companies at the start of the decade got ahead of consumers appetite for full switch to EVs.
Even though I fully believe in the future of EV and switch to EV, only point where I differ is the timeline.
I believe EVs will take center stage, but it will be later than sooner.
That is why we are also taking each step cautiously.
As you all know, we announced CAPEX for electrolyte additives only after we receive the firm contracts from the client.
Moving on, the semiconductor industry: The part of industry we are serving is seeing stagnant demand, while we are hoping that tide will turn in our favor soon, I believe the pain will be there for a couple of more quarters.
In commodity chemicals pricing remain under pressure driven by oversupply.
Overall, I believe the industry has started witnessing revival, but the pace of revival is slower and therefore I believe even in this financial year, the pricing pain and demand weakness will continue.
DIRECTOR, AMI ORGANICS LIMITED · MR. ABHISHEK PATEL – VICE PRESIDENT, STRATEGY,
Even in this difficult industry backdrop, I am delighted to share that we have been able to deliver a stellar revenue growth of 43.2% year-on-year in Q2 FY25. Our strategy of building industry
AMI ORGANICS LIMITED · MR. BHAVIN SHAH – CHIEF FINANCIAL OFFICER, AMI
October 29, 2024 leading infrastructure complemented by cutting edge process technology developed by our team which focus on CDMO contracts and chronic products has helped us deliver stronger results.
The growth during the quarter was driven strong performance in pharmaceutical intermediates as well as Specialty Chemical business.
I will let Abhishek to discuss this in detail.
Moving on the business update
During the last Earning Call, we had highlighted that we successfully concluded the GMP good manufacturing practice inspection by the Pharmaceutical and Medical Device Agency (PMDA) of Japan, with no critical or major observation.
I am very happy to share that during the last quarter, PMDA Japan has issued inspection result declaring the Sachin facility as GMP compliant.
I believe we are one of the few, if not the only company in the intermediate segment who has successfully concluded inspection and subsequently received compliant report from PMDA Japan.
Overall, we are seeing a revival in demand for our core molecules, supported by a strong ramp up in CDMO contract and robust volume growth in our Specialty Chemical’s business.
Looking at the orders in our hand and the forecast what we have, we are revising our revenue growth guidance upwards from 25% to 30% for FY25. Now, I will hand over the floor to our Vice President of Strategy – Abhishek Patel for further business updates.
Over to you, Abhishek.
Abhishek Patel
Thank you, Naresh Ji.
Good afternoon everyone.
Happy Diwali to you and your families.
Starting with the Pharmaceutical Intermediate business
The Pharmaceutical Intermediate business grew strongly by 53% Y-o-Y in Q2 FY25. The growth was driven by strong performance in key molecule, as well as earlier than anticipated ramp up in CDMO business.
Anti-cancer, anti-depressant, seizure disorder, anti-psychotic, Parkinson’s disease, anticoagulants and cardiovascular continues to be top therapeutic segment for us.
Coming to CDMO contract, We witness a strong ramp up in Q2 which was earlier than we have anticipated.
In Specialty Chemicals we deliver growth of 7.6% Y-o-Y, I would like to highlight here that, this was mainly driven by subpar performance in our subsidiary, Baba Fine Chem, if we look at the business ex-Baba Fine Chem, then there was a more than 25% growth in the Specialty Chemical business, which was offset by de-growth in BFC.
AMI ORGANICS LIMITED · MR. BHAVIN SHAH – CHIEF FINANCIAL OFFICER, AMI
October 29, 2024 As Naresh mentioned, the demand scenario for the part of semiconductor industry that we are serving remains subdued, which is impacting sales of BFC, but we are very much optimistic that this is a temporary situation and we will soon see growth coming back in FY26. As explained in last conference call as well, we have already started promoting our products of BFC to new geographies, and have already sent samples to the customers in Korea and Japan.
This will also add to the growth trajectory in coming years.
Now, coming back to Specialty Chemical business of ex-BFC, We have seen growth across our entire product portfolio, driven by significant uptick in volumes.
Coming to CAPEX for the year, CAPEX for H1 FY25 was 80 crore, majority of this was for remaining CAPEX of Ankleshwar site and some towards solar and electrolyte, additive CAPEX.
Let me give you further updates on the CAPEX projects, starting with the Ankleshwar project, one production block has already been completed as informed earlier.
Remaining work of other two blocks is progressing, and this is expected to be completed in current quarter.
This was slightly delayed due to extended and heavy rains during Q2. Extended heavy rains in Gujarat also impacted our solar project work.
The work progress was impacted during the monsoon and therefore there is a delay.
We now expect this project to be completed by end of Q3 FY25, with energy saving expected to start from Q4 FY25 which will contribute positively to our EBITDA.
Moving on to the electrode additive CAPEX, The project work has been started with civil structure plan in place, and construction is expected to start soon.
We have started ordering machinery as well.
Overall, we hope that we will complete the project in H1 of Calendar Year 25.
With that I will hand over the floor to CFO – Mr. Bhavin Shah to provide the financial update.
Over to you Bhavin.
October 29, 2024 but if I am taking three years, what is it that we should be comfortable with as far as growth is concerned?
Moderator · Conference Operator
Thank you.
Next question is from line of Rikin Shah from The Boring AMC.
Please go ahead.
AMI ORGANICS LIMITED · MR. BHAVIN SHAH – CHIEF FINANCIAL OFFICER, AMI
October 29, 2024
Rikin Shah
My question was pertaining to the weakness highlighted in Baba Fine Chem.
So, at our clients end, is that an issue on a client specific level, or an industry level issue that is persisting right now, and with respect to finding new clients in your geographies, how big of a gestation period do we think before we can sign more clients?
Moderator · Conference Operator
Thank you.
Next question is from the line of Saransh Gupta from SVAN Investments.
Please go ahead.
AMI ORGANICS LIMITED · MR. BHAVIN SHAH – CHIEF FINANCIAL OFFICER, AMI
October 29, 2024
Saransh Gupta
I have two questions.
Sir, one is that in your QIP that you did for 500 crore, in that utilization you mentioned that the 250 crore would be for debt utilization, but from your cash flow, I guess we can see only a 200 crore of utilization for debt repayment.
If you can throw some light on the mismatch of this.
And I have another question, if you want, I can ask that?
Moderator · Conference Operator
Thank you.
Next question is from the line of Reena Shah from Subhkam Ventures.
Please go ahead.
Reena Shah
Sir, I wanted to understand your export numbers and revenue numbers, some general set of discount.
Just wanted to understand what kind of adjustment is being done with the export numbers?
AMI ORGANICS LIMITED · MR. BHAVIN SHAH – CHIEF FINANCIAL OFFICER, AMI
October 29, 2024
Reena Shah
There is some dual effect, if I am understanding it correct, there is some dual effect which we generally talk that is there, and hence we got a discounted number and reported numbers.
Is that something of that sort?
Moderator · Conference Operator
Thank you.
Next question is from the line of Jason Soans from IDBI Capital.
Please go ahead.
Jason Soans
Sir my first question was just related to the various CAPEXs which are online.
I just sort of missed that, so just wanted to know the various CAPEXs which are online and when is the expected completed timeline.
Now, one thing I know is that Ankleshwar 33% is been blocked for the Fermion so basically we have two third remaining.
So, just some more color, and any other CAPEX which is on the board as of now and the expected timeline?
AMI ORGANICS LIMITED · MR. BHAVIN SHAH – CHIEF FINANCIAL OFFICER, AMI
October 29, 2024 end of Q3 FY25 maybe by December ‘24 and fruits we will get from the last quarter of this financial year.
Jason Soans
Okay, sir thank you so much for that.
Sir, 2000 electrolyte additives, 2000 tonnes for VC and another 2000 tonnes for?
AMI ORGANICS LIMITED · MR. BHAVIN SHAH – CHIEF FINANCIAL OFFICER, AMI
October 29, 2024
Moderator · Conference Operator
Thank you.
Next question is from line of Krishan Parwani from JM Financial.
Please go ahead.
Krishan Parwani
Couple of questions from my side.
Firstly, your revised guidance of 30% top line growth in FY25 translate to roughly current quarterly sales ended of 250 crores for the coming quarters as well.
So, are you being conservative at providing this guidance?
AMI ORGANICS LIMITED · MR. BHAVIN SHAH – CHIEF FINANCIAL OFFICER, AMI
October 29, 2024 but okay, fair fund got it.
And lastly, I missed your earlier commentary on the electrolyte additives.
I am not sure whether you mentioned, when would they start, when would the revenue start flowing in from the electoral additives?
Moderator · Conference Operator
Thank you very much.
Next question is from the line of Anubhav Sahu from MC Pro.
Please go ahead.
Anubhav Sahu
Just couple of questions, it’s on the Ankleshwar plant could you tell what is the utilization level for the first block which we have, and when can this reach a steady state of peak utilization level?
AMI ORGANICS LIMITED · MR. BHAVIN SHAH – CHIEF FINANCIAL OFFICER, AMI
October 29, 2024
Moderator · Conference Operator
Thank you.
Next question is from line of Gautam Rajesh from North Bridge Capital Partners.
Please go ahead.
Gautam Rajesh
So, I had a question regarding the electrolyte project.
Is there any update on the electrolyte project, by when do we expect to sign the agreement and start the CAPEX on it?
Moderator · Conference Operator
Thank you.
Next follow up question is from the line of Jason Soans from IDBI Capital.
Please go ahead.
Jason Soans
Sir, I did ask you about the CAPEX, just wanted to know, in light of the QIP, you have done this recently.
So, I just wanted to know, in light of that in terms of CAPEX, could you mention giving a guidance for CAPEX for 25 and 26 both probably for standalone and subsidiaries both of course, standalone and then the electrolytes say separate and BFC also separate, if that's possible for 25 and 26 both?
AMI ORGANICS LIMITED · MR. BHAVIN SHAH – CHIEF FINANCIAL OFFICER, AMI
October 29, 2024
Moderator · Conference Operator
Thank you.
Next question is from the line of Prince Chaudhary from Pink Wealth.
Please go ahead.
Prince Chaudhary
I have couple of questions.
First, in last concall you have mentioned that we are in negotiation with some of our originator clients in Europe, and we expect to sign deal by the end of this Q2 or Q3. So, can you please share some traction where we are right now?
AMI ORGANICS LIMITED · MR. BHAVIN SHAH – CHIEF FINANCIAL OFFICER, AMI
October 29, 2024
Prince Chaudhary
Okay, so this includes Fermion as well right?
Moderator · Conference Operator
Thank you.
Next question is from the line of Ankur Kumar from Alpha Capital Group.
Please go ahead.
Ankur Kumar
Sir my first question is on the increase in other income, which is like 8 crore and decrease in finance cost, there is a big reduction in finance cost, so is that all because of QIP money, or is there something else also?
Moderator · Conference Operator
Thank you.
Next question is from the line of Prashant Nair from Ambit Capital.
Please go ahead.
Prashant Nair
On the Fermion contract is validation for all markets done.
So, are your supplies now representative of what, the overall market demand for the product is, or are some markets still, are we supplying only for a few markets now and the rest is still being supplied by where we saw some earlier?
AMI ORGANICS LIMITED · MR. BHAVIN SHAH – CHIEF FINANCIAL OFFICER, AMI
October 29, 2024
Moderator · Conference Operator
Thank you.
Next question is from the line of Piyush Jain, Individual Investor.
Please go ahead.
Piyush Jain
Just want to know how much business we did in this quarter in CDMO and can you share the margin of the CDMO business?
AMI ORGANICS LIMITED · MR. BHAVIN SHAH – CHIEF FINANCIAL OFFICER, AMI
October 29, 2024 we are working with several other originators in Europe, USA, Japan, and those CDMO projects already going on in some of them are in sampling stage, some of them are going ahead in next few quarters.
So, slowly, slowly, all those projects will mature and give it as revenue, maybe from next year onwards or thereafter.
Moderator · Conference Operator
Thank you.
Next follow up question is from the line of Gautam Rajesh from North Bridge Capital Partners.
Please go ahead.
Gautam Rajesh
Is the full ramp up of our CDMO project already visible in Q2 numbers or further scale ups is expected in coming quarter?
Moderator · Conference Operator
Thank you.
Next question is from the line of Varun, Individual Investor.
Please go ahead.
Varun
Just one question, what is the expected revenue from Ankleshwar unit at full utilization?
Moderator · Conference Operator
Thank you.
Next question is from the line of Hemant, Individual Investor.
Please go ahead.
Hemant
Sir my first question is regarding the capacity.
The current capacity is 1100 KL and as per my understanding, block three of Ankleshwar unit has been commissioned.
So, once that other two blocks, it's commissioned which is in Q3 FY25 it is a current quarter.
So, what will it take our total capacity to?
AMI ORGANICS LIMITED · MR. BHAVIN SHAH – CHIEF FINANCIAL OFFICER, AMI
October 29, 2024
Moderator · Conference Operator
Thank you very much.
As there are no further questions, I will now hand the conference over to the management for closing comments.
Thank you very much.
On behalf of JM Financial Institutional Equities, that concludes this conference.
Thank you for joining us and you may now disconnect your lines.
Thank you.
Transcript has been edited for reading purpose.
Questions and answers
Bhavin Shah
Thank you, Abhishek.
I would like to briefly highlight the key “Performance Metrics” for the quarter before we open the floor for questions.
I will start with the Quarterly Performance
Revenue from operation for the quarter reached 246.7 crore representing 43.2% increase year- on-year basis.
Gross profit for the quarter was Rs.107.2 crore, reflecting 51.5% increase compared to the same period last year.
The gross margin was 43.4% up to 239 basis point on year-on-year basis, and 136 basis point on Q-on-Q basis.
Gross margin was driven by the better product mix.
EBITDA for the quarter was Rs.48.9 crore, almost doubled compared to the same period last year.
EBITDA margins were at 19.8% up 543 basis point year-on-year basis and 312 basis point Q-on-Q basis.
EBITDA margin was driven by gross margin as well as operating
AMI ORGANICS LIMITED · MR. BHAVIN SHAH – CHIEF FINANCIAL OFFICER, AMI
October 29, 2024 leverage.
PAT for the quarter was Rs.37.6 crore, which grew 1.5 times compared to the adjusted PAT of 14.7 crore in Q2 FY24. PAT margins for the quarter was 15.2% so the expansion of 668 basis point Y-o-Y basis, and 682 basis Q-on-Q basis.
Moving on the half yearly performance
Revenue from the operation for the first half of the year reach for 423.4 crore representing 29.8% increase on year-on-year basis.
EBITDA for the H1 FY25 was Rs.78.4 crore, up 33.4% Y-o-Y basis.
PAT for H1 FY25 was at 52.3 crore, up 41.3% Y-o-Y basis.
Moving on to the balance sheet item
Net cash and cash equivalent were at 279.5 crore.
I am happy to share that even with strong growth we were able to control our working capital, which was 108 days during H1 FY25, this was driven by improved debtor and inventory days.
Better working capital management lead to strong generation of cash flow from operation of 46 crore, which was 60% of the EBITDA for H1 FY25. Overall, as Naresh sir has mentioned, we are well on the track to deliver 30% growth for the year with healthy EBITDA margins.
With that, I request the moderator to open the floor for question.
Thank you.
Moderator · Conference Operator
Thank you very much.
We will now begin with the question-and-answer session.
The first question is from the line of Sudarshan Padmanabhan from JM Financial.
Please go ahead.
Sudarshan Padmanabhan
Sir, this quarter if you can give some color on how the margins for intermediate, pharma intermediate and Specialty Chemicals plan, and also some color on how do we see the margins in the next few quarters?