Release Date: November 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- India Pesticides Ltd (BOM:543311, Financial) achieved a revenue growth of 13.6% year-over-year, driven by increased volumes and favorable agricultural conditions.
- The company reported a significant EBITDA growth of 25.2%, improving EBITDA margins to 16.6%, showcasing effective cost management and operational efficiencies.
- Successful commissioning of intermediate plants for backward integration has reduced reliance on imports, aligning with the 'Make in India' vision.
- Expansion initiatives are on track, with a planned CapEx of INR 110 crore for FY25 to boost infrastructure and production capabilities.
- The company is expanding its customer base, now present in over 25 countries, and continues to focus on R&D to maintain a competitive edge.
Negative Points
- The technical segment experienced flat revenue growth, with a slight decline in sales compared to the previous year.
- Pricing pressures from China continue to impact the market, with average price declines of 19-20% across products.
- The demand in export markets has declined, contributing to a subdued pricing environment and reduced gross profit margins.
- Inventory levels are higher than usual, with current inventory days at 150, compared to pre-COVID levels of below 80 days.
- The company faces challenges in maintaining margins due to ongoing pricing pressures and the need to pass on cost reductions to customers.
Q & A Highlights
Q: Can you provide insights on the performance of the technical segment, particularly regarding revenue and volume growth?
A: The formulation volume increased by around 40%, while technical volume grew slightly less. There was no decline in local turnover, both domestically and in exports. Technical sales were approximately INR 137 crore this quarter, compared to INR 139 crore last year, indicating flat performance. However, technical volume growth was around 30%, despite a significant price decline of 19-20%. (Respondent: Unidentified_5)
Q: How is the pricing pressure from China affecting your business, and what is the current demand scenario in key markets?
A: Pricing pressure from China continues as they dump materials at low prices. We are countering this with product innovation to reduce costs, which has led to a 30% growth in technical volumes. Demand in key markets is stable, with some products experiencing seasonal demand. (Respondent: Unidentified_4)
Q: What are the expected revenue contributions from the Hamirpur plant once it becomes operational?
A: We expect a revenue increase of about 15-20% from existing plants. The Hamirpur facility should contribute around INR 50-60 crore next year, with full capacity utilization potentially generating INR 700-800 crore in three to four years. (Respondent: Unidentified_4)
Q: Can you explain the improvement in gross margins this quarter and the outlook for the next half?
A: The rise in EBITDA margin is due to improved efficiency and no inventory loss, as raw material prices have stabilized. Our R&D efforts and backward integration projects have also contributed to improved gross profit. We expect margins to remain in a similar range if prices stay stable. (Respondent: Unidentified_5)
Q: What is the status of the European approval for your technical product, and what is its potential impact?
A: We received technical equivalence for an insecticide in Europe, already registered with other companies. We are producing it for domestic use and will supply European customers once they obtain necessary permissions, expected in 2-3 months. The product has shown customer interest, but volumes are yet to be finalized. (Respondent: Unidentified_4)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
