ASTECNSEOctober 31, 2022

Astec LifeSciences Limited

4,618words

52turns

7analyst exchanges

6executives

Download PDF ↗ASTEC stock page →

Management on call

Nadir B. Godrej

CHAIRMAN – GODREJ AGROVET LIMITED & ASTEC LIFESCIENCES LIMITED

Balram Yadav

MANAGING DIRECTOR – GODREJ AGROVET LIMITED

S. Varadaraj

CHIEF FINANCIAL OFFICER – GODREJ AGROVET LIMITED

Anurag Roy

CHIEF EXECUTIVE OFFICER – ASTEC LIFESCIENCES LIMITED

Madhur Gundecha

CHIEF FINANCIAL

Nitin Agarwal

DAM CAPITAL ADVISORS LIMITED

Key numbers — 33 extracted

97%

nued to deliver a strong financial performance in Q2 as well as the H1 FY23. Total income grew by 97% in Q2 and 68% in H1 FY23 over the corresponding previous periods. The robust topline performance

68%

r a strong financial performance in Q2 as well as the H1 FY23. Total income grew by 97% in Q2 and 68% in H1 FY23 over the corresponding previous periods. The robust topline performance was driven by

35%

ompared to the same period last year. The consolidated profit after tax doubled in Q2 and grew by 35% year-on-year in H1 FY23. It should be noted that Q2 FY22 performance was impacted by flooding in

n our Mahad facility, and hence, there was a low base effect as well. The CMO sales contributed 8% of the total revenues in Q2 FY23 as compared to 4% in the same period last year. Export sales mor

base effect as well. The CMO sales contributed 8% of the total revenues in Q2 FY23 as compared to 4% in the same period last year. Export sales more than doubled in Q2, growing by 136% year-on-year

136%

as compared to 4% in the same period last year. Export sales more than doubled in Q2, growing by 136% year-on-year and contributed 69% to the total revenues. The domestic business also registered a g

69%

iod last year. Export sales more than doubled in Q2, growing by 136% year-on-year and contributed 69% to the total revenues. The domestic business also registered a growth of 41% year-on-year, althou

41%

year and contributed 69% to the total revenues. The domestic business also registered a growth of 41% year-on-year, although its share in total revenues declined as we allotted higher capacity to e

162%

in total revenues declined as we allotted higher capacity to export. For H1 FY23, exports grew by 162% year-on-year driven by both realization as well as volume growth. Domestic sales were up by 8% ov

18%

estic sales were up by 8% over the previous year. The EBITDA margin contracted to 18% from 21% in Q2 FY23 and 17% from 20% in H1 F23 versus the corresponding previous periods on accou

21%

es were up by 8% over the previous year. The EBITDA margin contracted to 18% from 21% in Q2 FY23 and 17% from 20% in H1 F23 versus the corresponding previous periods on account of two

17%

er the previous year. The EBITDA margin contracted to 18% from 21% in Q2 FY23 and 17% from 20% in H1 F23 versus the corresponding previous periods on account of two key reasons, a sha

Advertisement

Guidance — 20 items

Nadir Godrej

opening

“With this, I end my opening remarks, and we will be happy to take your questions.”

Nirav Jimudia

“And if you can answer this question in relation to A, which chemistries we are currently have the capabilities, and we are already stronger, and what we intend to add over next few years in terms of our chemistry capabilities?”

Nirav Jimudia

“Second, how many scientists, PhDs we intend to add to our new R&D center?”

Nirav Jimudia

“And third would be what could be the opportunity size orders we would initially like to target during the first few years of our CMO operations?”

Anurag Roy

“Our plan was to utilize it by 20%, 25% last year, 55% to 60% this year, and by end of third year, we want to utilize that plant to full as then we are very well on track to achieve those targets for the CMO business.”

Anurag Roy

“So that's the journey or the path which we plan to take on the medium-term basis.”

Anurag Roy

“The third question was on the new target development, right?”

Neerav Jimodia

“So how much we will be adding to our existing base of scientists, PhDs through our new R&D center?”

Anurag Roy

“It will be state-of-the-art R&D center with where we would be doing a lot of new product generation projects, process optimization, scale-up and product life cycle management work, and we would have the full synthetic labs, the kilo labs, the process safety labs, population lab.”

Anurag Roy

“So what we plan to do is we already have a good institutional capabilities in terms of the PhDs, some of the scientists, which are currently working with at almost 35, 40 of them with us currently.”

Risks & concerns — 10 flagged

Godrej, mentioned earlier part in the call that these were a little unprecedented times last few months wherein we saw a sharp increase in the raw material prices, the macros were all very volatile.

— Anurag Roy

So that put together put a pressure on the margins.

— Anurag Roy

So very difficult to give you a number, but we would try to take it to the higher end of the asset turn in the third year or the fourth year.

— Anurag Roy

So just if I adjust for these sales, there's been like a sharp decline quarter-on- quarter.

— Vidit Shah

If I just normalize these sales back into 1Q, so there's been a 20% to 25% decline in that case on a quarter-on-quarter basis.

— Vidit Shah

So could you just touch upon the factors that that have led to such a decline in revenue?

— Vidit Shah

There was weak realization due to high market inventories from the last season.

— Anurag Roy

So we faced a lot of margin pressure in some of our key products, while in other products where the prices were still at an elevated level, there was RM cost inflation which we were not able to pass on fully to our customers.

— Anurag Roy

Is it right to interpreted as a decline in volume due to the inventory buildup that you touched upon right now?

— Vidit Shah

So most of the decline was because of the margin reductions on some of the key products.

— Anurag Roy

Advertisement

Q&A — 7 exchanges

So, I have two questions, sir. First is for the CMO business, we did something around Rs. 88 crores of sales in FY 22. So if you can guide us that how directionally you see this business over the next few years? And if you can answer this question in relation to A, which chemistries we are currently have the capabilities, and we are already stronger, and what we intend to add over next few years in terms of our chemistry capabilities? That is one. Second, how many scientists, PhDs we intend to add to our new R&D center? And if you can touch up on the same with respect to our existing R&D cente

Anurag Roy

I'll take this. This is Anurag Roy. Very good afternoon to you Nirav. So for the CMO business, you are right in saying that we clocked Rs. 88 crores last year in revenue. And as we have given the outlook in the earlier calls as well, our goal is roughly to be 20%, 25% of the total revenues in CMO in the near short-term. And then heavily focusing on it as we move towards the medium and long-term. So we continue to heavily focus on the CMO business. Similar outlook was given to the investors and the stakeholders on the herbicide plant, with which we commercialized last year. Our plan was to util

Sir, my last call, we had highlighted that we were taking up four projects in terms of our CapEx for FY '23, the debottlenecking, sustainability, R&D and land bank for MPP, the new one. So can you just share your update on where are we in all these CapEx, sir?

Anurag Roy

Sure, Siddharth. Madhur, do you want to start with the answer and then I'll add to it, if that's okay. Sure. Siddharth, so basically, for the current year, we are expecting a CapEx spend in the range of INR 275 crores to INR 300 crores, out of this on INR 225 crores to INR 250 crores is expected to be capitalized in this year. So new R&D would be, let's say, around INR 110 crores. The new MPP plant would be around INR 100 crores. I think, yes. Anurag, do you want to add something on that? Yes. So I think whatever guidance which we gave in the last few investor call, we stick by those guidance,

Sir, I have one question. In last quarter, we said that we had some deferred revenue of around INR 30 crores, INR 35 crores, which was to be added in this quarter. So is that figure being added in this quarter numbers?

Anurag Roy

Yes. So from the last quarter, there has been some deferral sales. There has been some deferral from this quarter to the other one. But to answer your question, it has been added to this quarter sales numbers. So it will be the tune of around INR 30 crores, INR 35 crores? We had given an outlook of, I think, 15% to 20% of the revenues, which were the deferred sales -- so it should be in that percentage range itself. And sir, second thing, I just wanted to understand that since we have such a high CapEx requirement, which is around INR 300 crores to INR 350 crores. Do we intend to do any right

Yes, sir, you touched upon sulfonylurea as one of the areas where we want to focus in. So if you can just elaborate on that, what is the opportunity size there? How we want to capitalize on those capabilities, how much we need to invest over the next few years to develop those capabilities, some understanding what that part would be helpful, sir?

Anurag Roy

Our strategy to open two herbicide segment driven primarily via motivation to expand our product portfolio. That was one. And number two was to further leverage on our existing partnership or relationship with some of our existing customers, who wanted us to work in this particular area. So this particular capability was an extension to that and we are seeing a lot of good pipeline products in the sulfonylurea area as well within we have started the development and we see a good number of projects coming in the future as well. We also have a potent facility as we have mentioned in the previous

My first question was, you mentioned around INR 30 crores, INR 35 crores of sales deferred from 1Q to 2Q. So just if I adjust for these sales, there's been like a sharp decline quarter-on- quarter. If I just normalize these sales back into 1Q, so there's been a 20% to 25% decline in that case on a quarter-on-quarter basis. So could you just touch upon the factors that that have led to such a decline in revenue?

Anurag Roy

Yes. So for us, first of all, 35 is not the number which we gave. I talked about the percentage deferred sales from Q1. But we had a margin reduction in this particular quarter. because of the factors which Mr. Godrej also highlighted, we saw a sharp increase in raw material prices. There was weak realization due to high market inventories from the last season. The macros are also not supporting too much right now, there's a lot of raw material cost inflation. So we faced a lot of margin pressure in some of our key products, while in other products where the prices were still at an elevated le

I just want to understand what is the revenue share from CMO segment in Q1 and Q2 this year?

Anurag Roy

From CMO segment in H1, you were asking, right? We are almost at 11% of the revenue share from the CMO in H1 for FY '23. And the second question is how much percentage of RM is currently being imported? And how will this evolve going forward, so? We are -- in this year, roughly, I think earlier guidance, what we have also given as roughly 50% to 55% RM is what we bought this year in the first half, it was slightly on the higher side, close to 65% to 68% RM is what we have imported and so we continue to reduce our dependency on import specifically from China through various backward integration

I hope we have been able to answer all your questions. If you have any further questions or would like to know more about the company, we would be happy to be of assistance. Thank you once again for taking the time to join us on this call.

Management

Speaking time

Anurag Roy

Moderator

Neerav Jimodia

Siddharth Gadekar

Divyesh Mehta

Vidit Shah

Praful Siddharth

Nadir Godrej

Nitin Agarwal

Nirav Jimudia

Advertisement

Opening remarks

Nitin Agarwal

Hi. Good afternoon, everyone, and a very warm welcome to the Astec LifeScience Limited Q2 FY '23 post results earnings call hosted by DAM Capital Advisors. We thank Astec LifeScience management for giving us the opportunity to host this call. Let me now introduce the management participants on the call today from Godrej Agrovet Limited, we have Mr. Balram S. Yadav, Managing Director, and Mr. S. Varadaraj, Chief Financial Officer. From Astec LifeSciences Limited, we have Mr. Anurag Roy, Chief Executive Officer, and Mr. Madhur Gundecha, Chief Financial Officer. We would like to begin the call with brief opening remarks from the management, following which we will have the floor open for an interactive question-and-answer-session. Before we start, I would like to point out that some statements made in today's call may be forward-looking in nature. And the actual results may differ from those expressed or implied. I would now like to invite Mr. Nadir Godrej to make the initial remarks. Ple

Nadir Godrej

Good day, everyone. I welcome you all to the earnings call of Astec LifeSciences. I hope you're doing well. I will take you through the financial performance and key developments of the company during the second quarter and the six months ended 30th September 2022. Astec continued to deliver a strong financial performance in Q2 as well as the H1 FY23. Total income grew by 97% in Q2 and 68% in H1 FY23 over the corresponding previous periods. The robust topline performance was driven by volume growth in export markets coupled with higher realizations in both the export and domestic markets as compared to the same period last year. The consolidated profit after tax doubled in Q2 and grew by 35% year-on-year in H1 FY23. It should be noted that Q2 FY22 performance was impacted by flooding in our Mahad facility, and hence, there was a low base effect as well. The CMO sales contributed 8% of the total revenues in Q2 FY23 as compared to 4% in the same period last year. Export sales more than d

Advertisement

← All transcripts ASTEC stock page →

Astec LifeSciences Limited

Market Movers