HERANBANSEQ2 FY'23November 08, 2022

Heranba Industries Limited

7,241words
254turns
10analyst exchanges
4executives
Management on call
Raghuram K. Shetty
MANAGING DIRECTOR - HERANBA INDUSTRIES LIMITED
Ronak R. Shetty
EXECUTIVE DIRECTOR – HERANBA INDUSTRIES LIMITED
Rajkumar Bafna
CHIEF FINANCIAL OFFICER - HERANBA INDUSTRIES LIMITED
Rohan Ohri
EMKAY GLOBAL FINANCIAL SERVICES LTD
Key numbers — 40 extracted
19.8%
r taking your valuable time for Heranba's Q2 FY'23 earnings call. The company's revenue surged by 19.8% YoY to INR 4,233 million in Q2 FY'23 driven by strong performance in domestic markets, navigating
INR 4,233 million
valuable time for Heranba's Q2 FY'23 earnings call. The company's revenue surged by 19.8% YoY to INR 4,233 million in Q2 FY'23 driven by strong performance in domestic markets, navigating uneven monsoon distribut
INR 410 million
ise in MSP (minimum support price) of rabi crops for the upcoming marketing season. We have spent INR 410 million on capex at our Sarigam facility during H1 FY '23, and we will be spending additional INR 1,000 m
INR 1,000 million
410 million on capex at our Sarigam facility during H1 FY '23, and we will be spending additional INR 1,000 million in H2 FY '23. The commercial production of technical- grade pesticides and intermediates from the
15%
verse product portfolio, R&D capabilities and prudent both strategies. We are on track to achieve 15% to 17% sales growth in FY'23, with EBITDA margin staying at 16% to 18%. The company is well poi
17%
roduct portfolio, R&D capabilities and prudent both strategies. We are on track to achieve 15% to 17% sales growth in FY'23, with EBITDA margin staying at 16% to 18%. The company is well poised to
16%
egies. We are on track to achieve 15% to 17% sales growth in FY'23, with EBITDA margin staying at 16% to 18%. The company is well poised to build on the strong operational competencies developed over
18%
We are on track to achieve 15% to 17% sales growth in FY'23, with EBITDA margin staying at 16% to 18%. The company is well poised to build on the strong operational competencies developed over the
19%
l highlights for quarter ended 30th of September 2022. Revenue from operation increased by around 19% YoY to INR 4,233 million in Q2 FY'23 as compared to INR 3,534 million in Q2 FY'22
INR 3,534 million
ation increased by around 19% YoY to INR 4,233 million in Q2 FY'23 as compared to INR 3,534 million in Q2 FY'22. EBITDA grew by 6.2% YoY to INR 705 million during the quarter with EBITDA margin at
6.2%
million in Q2 FY'23 as compared to INR 3,534 million in Q2 FY'22. EBITDA grew by 6.2% YoY to INR 705 million during the quarter with EBITDA margin at 16.49% in the Q2 FY '23. Profit
INR 705 million
in Q2 FY'23 as compared to INR 3,534 million in Q2 FY'22. EBITDA grew by 6.2% YoY to INR 705 million during the quarter with EBITDA margin at 16.49% in the Q2 FY '23. Profit after tax stood at INR 4
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Guidance — 20 items
Raghuram Shetty
opening
“We have spent INR 410 million on capex at our Sarigam facility during H1 FY '23, and we will be spending additional INR 1,000 million in H2 FY '23.”
Raghuram Shetty
opening
“We are on track to achieve 15% to 17% sales growth in FY'23, with EBITDA margin staying at 16% to 18%.”
Rajkumar Bafna
opening
“However, the sector fundamentals continue to remain strong on medium term and long term basis.”
Bhavya Gandhi
qa
“And Sir, we've given a revenue guidance of 15% to 17% for this year.”
Bhavya Gandhi
qa
“And so in the H2, what are we planning to reach the annual revenue guidance because the capacity utilization is at peak in Technicals?”
Raunak Shetty
qa
“Going forward for this first half, as we guided for that, it will be around 16% to 18% margins, and we are sticking to that.”
Yogesh
qa
“So do we think that Q3, again, exports will be strong like last year?”
Raunak Shetty
qa
“No, it will be more or less in that range only.”
Raunak Shetty
qa
“We will not say it will be very strong or something.”
Raunak Shetty
qa
“So going forward also, we feel the balance of both domestic and export would be able to drive that growth and not just the export market.”
Risks & concerns — 6 flagged
Our export business was impacted by the lockdown in China coupled with volatile global macroeconomics.
— Raghuram Shetty
Sir, we were told that in US, the market is controlled by a few distributors, ideally three or four and they have been supplied from a few Indian players, which is very difficult to break through.
— Rajesh Jain
Tonnage, it's very difficult to specify in this business.
— Rajkumar Bafna
So based on the tonnage, it is very difficult to get a correct idea in this business.
— Raunak Shetty
And lastly on in initial commentary, we said that there was some margin pressure from higher raw material cost, which is now like, it has normalized.
— Yogesh
So are we expecting any price hike in this quarter to offset any pending pressure from higher raw material costs earlier?
— Yogesh
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Q&A — 10 exchanges
Q
Congratulations on good set of numbers. My first question is what is the capacity utilization right now? And with INR 41 crores of capex that we've done, what kind of asset turn are we looking? And is it comprised as the commercialization started?
Raunak Shetty
So, the capacity utilization currently is around the same as last quarter, that is around 89-90 %. The capex that we have done is for the new site in Sarigam, and that is not yet commenced. It will be commencing in Q4 FY'23. So asset turns that we'll be able to see is somewhere around 3x. 3x of assets turns. In Technicals, you are mentioning? It will not be immediately. We will not be able to see that kind of asset turns. But over the period, when it is at around 80% to 85% capacity utilization, we should be able to see something around 3x. This 89% to 90% capacity utilization you are mentioni
Q
So Sir, I had one question regarding Q3. So normally, our Q3 is very strong in exports. Last year, about 44% of revenue came from exports. And Q2, we had only 32%. So just wanted to know what are the drivers for a strong export growth in Q3, given that there is a lockdown in China. So do we think that Q3, again, exports will be strong like last year?
Raunak Shetty
No, it will be more or less in that range only. We will not say it will be very strong or something. We are trying our best, and able to match somewhere around the range that we have mentioned, that is around 15% to 18%. The domestic business is doing better. So that's how we are able to cover whatever shortfall that we had in Q1. So going forward also, we feel the balance of both domestic and export would be able to drive that growth and not just the export market. Because globally, there are a lot of things happening currently. So we'll have to factor that as well while considering the growt
Q
Sir, with respect to rabi portfolio, do we have rabi mix in our portfolio? Because generally, H2 is rabi season. So what would be the revenue mix from rabi?
Raghuram Shetty
So when there is good rainfall, there's a good paddy plantation. So we will have that which usually does not happen when there are water issues. So overall, we will have a better mix in domestic market. This will be one difference. I hope that answers your question. No, what is rabi as a percentage to our sales, maybe mix in our portfolio product basket? It should be around 60:40. 60 rabi and 40 would be kharif base. No, 60% kharif and 40% rabi. But because of crop pattern change, there could be some difference. So what we had seen in the past, maybe we would see a different kind of business t
Q
Yes. Sir, so I have two questions. The first one was on margin. So between Formulations and Technical, which portfolio is a better margin portfolio for us?
Raunak Shetty
Usually, it is as a portfolio Technicals were better margins for us. But now because the base in the Formulation Branded business is less. That's why Formulation had lower margins, gross margin. And now our business in the Formulation also has increased over the last two years. And with that, the fixed cost or semi variable kind of costs remain the same, more or less. So that has increased overall EBITDA margins at the branded level also. So domestic Formulation business margins have improved over last year, which may, in the future, I don't know you may be able to see somewhat similar kind of
Q
Sir, my first question is, if you see your presentation, Slide number 10, where you have given revenues from Technical and Formulations. For FY '22, the revenues from Technicals was INR 9,669 million, whereas the Formulations is INR 4,677 million.
Raunak Shetty
Right. But if you see for H1 FY '23, the Technicals is only INR 2,982 million. Is there any error in that? Currently, it's a total -- if you see the Technicals revenue comes to around INR 450 crores plus. That is what I was worried because it is showing uncertainty in the Formulations. But is the Formulation is from the -- H1 is INR 478 crores? No. Currently, Formulations is around INR 300 crores in H1 FY23. As far as the Technical is around INR 475 crores and the remaining is around INR 300 crores is the Formulations. So we'll look into that percentage. I think it looks like it must have got
Q
Could you highlight what our capacity would be post Sarigam and post Saykha going online?
Raunak Shetty
You should say around 15,000 to 20,000 tons overall, both Sarigam and Saykha. Okay. And for Sarigam? Sarigam, see, first phase is what we've said is around 5,000 tons. And what is the time line for Phase 2 at Sarigam and let's say, Phase 1 at Saykha? We have to consider for Sarigam, Phase 2 would be Q3FY’24, and the Saykha would be kind of Q1 FY '25. And how would this 30,000 capacity be divided among Formulations and Technicals? Tonnage, it's very difficult to specify in this business. Tonnage is not the correct way to assess, because there's a different price line. See, some products are INR
Q
I have a couple of questions. First is, we have not seen much growth in technical segment this year, specifically H1 FY23 and domestic technical. Any specific reason?
Raunak Shetty
No. we have mentioned that export has been a little dull during H1 FY23, but domestic business has done better as compared to the export business. So that way, we've tried to maintain the balance. There were some price pressures in the initial phase. So we did not focus on grabbing more orders based on lower prices. We try to maintain our product margins. That's why we've seen some hit in the technical side. Okay. Sir, I just wanted to know, we got one registration in Europe and expecting two registrations from US. So these are from pyrethroids basket itself? No. It's one herbicide and one in
Q
Again, Sir, my question is regarding the capex. So you have mentioned that around INR 150 crores this year and again another INR 150 crores next year. So all this capex would be done through the internal accruals only?
Rajkumar Bafna
Most of the internal accruals, if we need some term loan, we can look into that. But then as of plan, we are stick with the internal accruals. Okay. Sir, for the Sarigam both Phase I, Phase II, you have mentioned, around 10,000 metric ton capacity will be added, right? Yes. Yes. And for the Saykha, so we have two plants. Out of it, the 34,000 is one where I think we are doing the next capex. So there also, will you be doing the -- in Phase IIs or it is in 1 phase only? In the two phases, we'll start with one and we start in one and then the multipurpose plant will follow. Okay. But both for Ph
Q
How much price hike we had taken in the first half?
Raunak Shetty
In few products, we have taken price hike. It's not across products, we have not taken price hikes. Okay. So how much size price hike we had taken? Pardon? So for a few products, how much price hikes we had taken? And what is the impact on overall mix? The overall mix impact may not be very much. The price hikes would be somewhere around 5% or so in few products. But as a whole, it may not have a major impact. And Sir, can you quantify the revenue contribution from pyrethroids portfolio? Annualized we have, but for first half, we will have to get back. Okay. And can you give some color on pyre
Q
Yes. Thank you so much for taking interest in this con call. I wish you all the best. Thank you so much.
Management
Speaking time
Raunak Shetty
97
Rajesh Jain
34
Rajkumar Bafna
26
Bhavya Gandhi
18
Yogesh
17
Chintan Patel
16
Moderator
12
Jay Modi
12
Vicky Waghwani
10
Vaibhav Gogate
7
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Opening remarks
Rohan Ohri
Yes. Thank you so much. Good evening, everyone. I would like to welcome the management and thank them for this opportunity. I shall now hand over the call to the management for the opening remarks. Over to you, gentlemen.
Raghuram Shetty
Yes. Thank you very much. I'm Raghuram Shetty, Managing Director, Heranba Industries Limited. Thank you, everyone, for taking your valuable time for Heranba's Q2 FY'23 earnings call. The company's revenue surged by 19.8% YoY to INR 4,233 million in Q2 FY'23 driven by strong performance in domestic markets, navigating uneven monsoon distribution. Our export business was impacted by the lockdown in China coupled with volatile global macroeconomics. Our EBITDA margins were under check due to higher raw material prices and a rise in power and fuel costs. The domestic agrochemical industry is likely to do well in H2 FY'23 due to residual moisture, owing to late withdrawal of the southwest monsoon, higher reservoir levels and rise in MSP (minimum support price) of rabi crops for the upcoming marketing season. We have spent INR 410 million on capex at our Sarigam facility during H1 FY '23, and we will be spending additional INR 1,000 million in H2 FY '23. The commercial production of technica
Rajkumar Bafna
Thank you, sir. Good evening, everyone. I would like to brief touch upon the key performance highlights for the second quarter ended 30th of September 2022, and then we'll open the floor for question and answers. Now, moving towards financial highlights for quarter ended 30th of September 2022. Revenue from operation increased by around 19% YoY to INR 4,233 million in Q2 FY'23 as compared to INR 3,534 million in Q2 FY'22. EBITDA grew by 6.2% YoY to INR 705 million during the quarter with EBITDA margin at 16.49% in the Q2 FY '23. Profit after tax stood at INR 477 million in Q2 FY '23 as compared to INR 456 million in Q2 FY '22. The company's domestic export mix stood at 67: 33 in Q2 FY'23 as against 68:32 in Q2 FY‘22. Heranba exports were checked due to lockdown in China coupled with global macroeconomic challenges. However, the sector fundamentals continue to remain strong on medium term and long term basis. That concludes the update on financials. Now we can open the floor for questio
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