CLEANNSEQ3 FY24-25January 30, 2025 Clean Science and Technology Limited
9,044words
249turns
16analyst exchanges
3executives
Management on call
Siddharth Sikchi
EXECUTIVE DIRECTOR AND PROMOTER, CLEAN SCIENCE AND TECHNOLOGY LIMITED
Sanjay Parnerkar
CFO, CLEAN SCIENCE AND TECHNOLOGY LIMITED
Pratik Bora
VICE PRESIDENT, CLEAN SCIENCE AND TECHNOLOGY LIMITED
Key numbers — 40 extracted
40%
r-on-quarter comparison: the revenues were steady with domestic and international sales mix being 40% and 60% respectively. Favorable product mix and utility cost increased EBITDA by 8% to Rs. 102 cr
60%
rter comparison: the revenues were steady with domestic and international sales mix being 40% and 60% respectively. Favorable product mix and utility cost increased EBITDA by 8% to Rs. 102 crores whi
8%
es mix being 40% and 60% respectively. Favorable product mix and utility cost increased EBITDA by 8% to Rs. 102 crores while EBITDA margin strengthened to 45%. Profitability of the Company increased
Rs. 102 crore
being 40% and 60% respectively. Favorable product mix and utility cost increased EBITDA by 8% to Rs. 102 crores while EBITDA margin strengthened to 45%. Profitability of the Company increased by 10% to Rs. 74
45%
mix and utility cost increased EBITDA by 8% to Rs. 102 crores while EBITDA margin strengthened to 45%. Profitability of the Company increased by 10% to Rs. 74 crores with PAT margin being 32.5%. Re
10%
Rs. 102 crores while EBITDA margin strengthened to 45%. Profitability of the Company increased by 10% to Rs. 74 crores with PAT margin being 32.5%. Regarding year-on-year comparison: the sales increa
Rs. 74 crore
crores while EBITDA margin strengthened to 45%. Profitability of the Company increased by 10% to Rs. 74 crores with PAT margin being 32.5%. Regarding year-on-year comparison: the sales increased by 20% and t
32.5%
ened to 45%. Profitability of the Company increased by 10% to Rs. 74 crores with PAT margin being 32.5%. Regarding year-on-year comparison: the sales increased by 20% and this was primarily volume le
20%
74 crores with PAT margin being 32.5%. Regarding year-on-year comparison: the sales increased by 20% and this was primarily volume led. Improved sales led to strong EBITDA growth of 18% during this
18%
increased by 20% and this was primarily volume led. Improved sales led to strong EBITDA growth of 18% during this quarter. Consequently, the Company reported 19% growth in profitability for the curre
19%
sales led to strong EBITDA growth of 18% during this quarter. Consequently, the Company reported 19% growth in profitability for the current quarter. Regarding console financial highlights: The Co
Rs. 240 crore
itability for the current quarter. Regarding console financial highlights: The Company recorded Rs. 240 crores sales for quarter 3, which is 23% higher on an annual basis and steady on a sequential basis. Co
Guidance — 20 items
“I am happy to connect with you all in this New Year to discuss the business performance of our Company for Q3 FY25.”
Regarding console financial highlights
opening
“160 crores during the first 9 months FY25, which was primarily towards investment in our subsidiary Clean Fino-Chem.”
Regarding console financial highlights
opening
“The construction of the new performance chemical product is on track and we expect to commercialize the production by H2 FY26.”
“And in the same facility, we will be starting another product which is called as Barbituric acid, which is an intermediate used to produce pigment yellow.”
“Our product from lab and pilot has been approved by large customer like Sudarshan Chemical and we expect to begin this production of Barbituric acid in the next 3 months.”
“So, same equipment of Para Benzoqunone will be converted into Barbituric acid, so no CAPEX, a little bit here and there, but we will start with this new product.”
“Great to know that quick decisions and quick improvisation, so Siddharth, anything on what would be the quantum size of the production and the realization from this product that we can expect?”
“3 crores, we entered into this new product BHT and we will be making this product on campaign basis for few of our customers who are also our current customers of BHA.”
“90 crores of revenue and when do we expect this to happen?”
“See, typically we expect to get all approvals in the next 6 months.”
Risks & concerns — 10 flagged
I would like to say these are difficult times for the chemical industry.
— Siddharth Sikchi
First on the cost side, book keeping question, there has been a sharp decline sequentially.
— Sanjesh Jain
Is power cost decline can be attributed to the solar plant or is something else and why the other expenses have dipped sequentially by 10%?
— Sanjesh Jain
So, none of the categories, these categories that you have mentioned is from the very end category perspective, is there any stress going on or the product itself or the category itself is doing well, anything that you have picked up from the distributor?
— Arun Prasath
And just one more bit on the overall growth front, sorry, overall realization front, are we seeing any further pressure versus let us say on Q-on-Q basis or maybe versus 6 months for our products or it is largely stable?
— Ankur Periwal
I have a like broad spectrum perspective I want to know that because your Company is like entering in a market where you have a few checklists like you should be a clean technology, it should be a unique process, then it basically it should be a import substitution and again if all this fulfills, then it should be a high margin product, but as a Company, how difficult for you to find such product in R&D?
— Jay Patwa
Very difficult, sir, but we are trying our best.
— Siddharth Sikchi
This is very difficult question because as I rightly said, it has just been a month that we have started appointing distributors.
— Siddharth Sikchi
It is a very difficult question to tell you today specific percentage.
— Siddharth Sikchi
I wanted to understand what China’s market share in terms of capacity in HALS and who is driving the pricing pressure here?
— Srishti
Q&A — 16 exchanges
Q
Yes. Hi, team, congratulations for great set of numbers. My question is on we were planning to take some price hike somewhere post December. Have you taken that? Is that the reflection of gross margins quarter-on-quarter improving or is it because phenol prices have slightly fallen down, so without price increase also is what the gross margin gains have come?
Siddharth Sikchi
The dollar depreciated to INR 87 levels. So, we have not increased prices, our prices have still remained at similar levels whereas we continue to see increase in volumes, but of course as you said, there has been a slight reduction in raw material price and of course the dollar impact naturally has given us the edge. Perfect. Now coming to MEHQ, P-BQ and TBHQ, MEHQ, what has been the utilization based on capacity? Has that improved slightly? P-BQ and also TBHQ, if you can highlight, in P-BQ, we were supposed to restart, in last quarter somewhere you had given some update. Update on that also
Q
Good evening. Thanks, Siddharth for taking my questions. First on the cost side, book keeping question, there has been a sharp decline sequentially. Is power cost decline can be attributed to the solar plant or is something else and why the other expenses have dipped sequentially by 10%?
Siddharth Sikchi
See, so the other income has come down because we booked forex loss. No. Power and fuel came down because there was a slight reduction in coal prices. Yes, I can hear you. Second was that out of in this last quarter, 5 days, we were off for Diwali. So, production was also stopped and hence the coal consumption was lower to that extent. So, that is why coal consumptions were lower by 7% because of these two parameters. Got it and other expenses? In other expenses, the major part is power and fuel. So, that is essentially driving the other expense lower. That is the same thing. Got it. Yes. And
Q
Thank you for the opportunity. Siddharth, first on this, apart from 770 in which of those grades we are seeing maximum kind of a good feedback from the customers or distributors, and which is likely to scale up faster where you have we are hopeful of utilizing the capacity?
Siddharth Sikchi
So, the deal is now that now see, all these products came one after another. So, first we started with 770, then we started with 622, then with 119, then with 944. So, as and when these products started coming in, those were the first products which we started selling. But when you start now that the entire basket is there, now we expect that based on our capacity on similar pro-rata basis, we should start seeing the market penetration. All the distributors whom we have appointed they onboarded us because they know that entire basket is going to be around. So, now going forward, the way we hav
Q
Hi, Siddharth. Thanks for the opportunity and congratulations for good set of numbers. First clarification, so apart from HALS, we were doing 3 CAPEX, Rs. 150 crores, Rs. 150 crore and Rs. 30 crore. Rs. 30 crores has already got commissioned and for the other two you mentioned, they both of them will get commissioned by H1 of the next financial year, is that right?
Siddharth Sikchi
No, the performance chemical one Rs. 150 crores starting in July. And the other one was December? The other one December, construction begins first week of February. Sure. And sorry, you said construction starts in February and the commercialization is December this year 25? So, let us say Q4 of next financial year. Fair enough. Secondly, again, just trying to understand, since you mentioned the focus on distribution network for HALS will be the key thing to look out for. Now, I am trying to divide it into India and global and India, largely, the distribution network is already in place or the
Q
Thanks for taking my question. Am I audible?
Siddharth Sikchi
Yes, sir. Well, congrats for very good set of numbers. So, I am new to this Company. So, just wanted to understand that there a difference between the standalone consolidated EBITDA margins. Can you please help me what is dragging this because the difference in revenues is minuscule as compared to the margin difference and when can we see it converging down? Right. So, Pankaj subsidiary was commercialized only last year March and it is a 34 acre greenfield capex which we have undertaken for tax reasons. Being greenfield capex, the fixed overheads are higher and impacting EBTIDA margins. The ta
Q
Thanks for the follow up opportunity. So, this year, Rs. 160 crore CAPEX 9 months is broadly for performance chemical and for next year we require that Rs. 150 crores of water treatment. That is the only CAPEX spend required for next year, right?
Siddharth Sikchi
I mean, unless we don't come up with something new, but yes, so far these are the numbers. Got it. Now, did I hear correctly that you said that you are looking out for something 4000 tons as a target number for HALS in FY26? Is that right that I heard? We are targeting 3000-4000. See that is a plan we want to pursue. So, we are keeping the bar a little higher, so let us see what we are able to achieve, but now that all the lines are ready, the production is ready, product is approved, customers or distributor network is set up and we think why we should not be able to do this. Exactly Siddhart
Siddharth Sikchi
Yes, sir. Hi, Siddharth. I have a like broad spectrum perspective I want to know that because your Company is like entering in a market where you have a few checklists like you should be a clean technology, it should be a unique process, then it basically it should be a import substitution and again if all this fulfills, then it should be a high margin product, but as a Company, how difficult for you to find such product in R&D? Very difficult, sir, but we are trying our best. So, can we assume that in future if Company wants to grow then you have to compromise in this checklist either at the
Q
HALS, I just wanted to understand, how much percentage will come directly from the client level and how much we see from the distributor level?
Siddharth Sikchi
This is very difficult question because as I rightly said, it has just been a month that we have started appointing distributors. It is a very difficult question to tell you today specific percentage. And why it is not approved by the traditional distributor? You said you appointed new distributors on the HALS side who had similar products which you will cross sell in terms of that? So, you have not approached the existing distributors just wanted to understand that? No, sorry. Go again. We have appointed a lot of distributors who are new, who don't sell HALS. So, why don't we approach to the
Q
Good evening. Thank you so much. Sorry, I joined the call a few minutes late, so I might have missed this data point in case you shared it, but for HALS, what would the total volume have been that we have done year to date, if it is possible to share, please?
Siddharth Sikchi
Last quarter, we did 600 tons, Q3, which is the highest and exit of December was about 200 tons a month which I had discussed about 2 quarters ago that our first target of the first milestone is to do 200 tons a month which we have achieved. Now, going forward, we only have to increase these volumes. All the products are commercialized, quality is approved. Our product is in line with our competitors. So, now there is no problem there. A few quarters ago, people had this question whether our product is going to be approved or would be similar to BASF or a competitor, now those questions are be
Q
Yes, sir, thanks for taking my question. My question is related to the previous participant also, so he didn't mention that on a quarterly basis, 1Q was around 125 tons and 135 tons and 200 tons. So, it does lead to a figure of around 1700, 1800 tons. Is that a fair volume assessment for HALS for FY25 are you saying?
Siddharth Sikchi
That is true. I mean you add this numbers with Quarter 4 of about 600 tons again, more or less 600-650 then you will arrive to that number only. Right, yes sir, and you did also mention that average realization for this year probably around 4.5 and with advanced HALS, you are looking to target $5.5-$6 for HALS, right? This quarter 3 was 4.5. Quarter 4 would be similar, but future on as we dive into FY26 with all these new products, we expect that next year say volume of whatever a few thousands or 3000- 4000 tons with prices of $5-$6. Sure and, sir, in this definitely the depreciating rupee, t
Q
Thanks for the opportunity and congrats on good set of numbers. The first question is, given that now we are expanding and appointing distributors domestically as well as outside, will it lead to the inventories and debtors being higher than the current levels?
Siddharth Sikchi
It won't have a very big impact because the revenues are also scaling up. So, we are not stocking a very high inventory and apart from these pharma intermediates and performance chemical segments which are coming up, they have sizable domestic market. So, the inventory or the receivable won't pile up. We would remain in that narrow range of 24%-25% of sales as a working capital. Fair enough. That is helpful. Second question again on the HALS front, so currently I think you said that about 10% revenues came from HALS during this 9 month, if I am not wrong? During the quarter. During the quarter
Q
Hello. Am I audible? Hello.
Siddharth Sikchi
Yes, Jash. Hi, sir. Thank you for the opportunity and congratulations for a good set of results. Sir, my question is on HALS, sir you mentioned that next year you are looking to gather more share from 944 and 119 and that should improve the realization. And you also mentioned that that should the margins as well so what level should we assume because we used to say 25%, so any guidance on that? I think just wait for a quarter, we will give you more clear guidance in the next quarter call. The best important take away from this quarter is all the products are now commercialized, all quality iss
Q
Thank you for the opportunity. I wanted to understand what China’s market share in terms of capacity in HALS and who is driving the pricing pressure here? Chinese or BASF?
Siddharth Sikchi
BASF. And China's market share in terms of capacities or maybe market size of HALS? Maybe 30%. 30%, understood. And sir, we were talking about, what kind of savings can we expect in our power cost now that we are talking about solar coming in and has that fully materialized in this quarter? We have just installed 400 kilowatt of solar capacity, not MW. Our utility cost is largely coal cost, which is essentially fuel cost. Power cost is hardly 15% of overall utility cost. Understood. And sir, there was this some noise about funding for the ARV Drugs, but that faded. So, what do our customer con
Q
Hi, sir. Congrats on good set of numbers. Just three small questions from my side. So, first, just wanted to understand of the overall HALS volume that you have done till now. So, just a ballpark number, how much would be like 770? Not the exact one, but just a range like 40%-50% or more?
Siddharth Sikchi
We are not sharing HALS’ category wise volumes, we are talking about HALS portfolio in particular, in general. No, got it, fair enough. I don't want you to reveal confidential details. That is fine. Sir, just secondly, on this, do you expect large revenue contribution from BHT and Barbituric acid in FY26? I told you for Barbituric acid we are mapping the capacities, so even if you are able to, lets say 400-500 tons, we will have to really map it, again these are very approximate numbers. This is about a $4.5 kilo product. So, even if we do 400-500 tons you can do the math. BHT, we estimate we
Q
Thanks once again for the follow up opportunity. So, that my question is on the sales to the Europe, it seems to picking up a lot and especially this quarter. Is this something which is one- off or this is structural and will be more and more towards will be Europe oriented rather than Chinese, is that the way it will play out?
Siddharth Sikchi
We are trying to increase the market share. So, nothing is one-off now. Now the market should grow, we should start selling, 1 quarter come, 1 quarter goes, but things should now only start picking up. We have done all the REACH registration except one product so as and when reach registrations are also in place, we should start selling in the market. When we sell more than it is not one off, it is what we are trying to achieve, right? So, fair to say that Europe will become the largest for us in a couple of years? There is US, there is Europe, there is also Latin. I am not saying that Europe
Q
Thank you so much all of you for spending time to understand our Company in this late evening. Have a great week ahead and thank you and we will catch up again on the next quarterly call. Bye, bye.
Opening remarks
Siddharth Sikchi
Thank you so much. Good evening, everyone. I am happy to connect with you all in this New Year to discuss the business performance of our Company for Q3 FY25. I would like to say these are difficult times for the chemical industry. Despite that, Clean Science has demonstrated robust cross cycle EBITDA margins and firm growth plans underpinned by its technology prowess and customer-first approach. Our business performance continues to reflect the enduring fundamentals and agility.
Regarding the standalone financial highlights
Starting with quarter-on-quarter comparison: the revenues were steady with domestic and international sales mix being 40% and 60% respectively. Favorable product mix and utility cost increased EBITDA by 8% to Rs. 102 crores while EBITDA margin strengthened to 45%. Profitability of the Company increased by 10% to Rs. 74 crores with PAT margin being 32.5%. Regarding year-on-year comparison: the sales increased by 20% and this was primarily volume led. Improved sales led to strong EBITDA growth of 18% during this quarter. Consequently, the Company reported 19% growth in profitability for the current quarter.
Regarding console financial highlights
The Company recorded Rs. 240 crores sales for quarter 3, which is 23% higher on an annual basis and steady on a sequential basis. Consolidated EBITDA stands at Rs. 98 crores, which is 14% higher on an annual basis and 10% higher on a sequential basis. The EBITDA margin for the quarter came in at 41.5%. For the quarter, profitability was Rs. 66 crores, which is 5% higher on an annual basis and 11% on a sequential basis. On business update, let me first discuss the progress on HALS. At the outset, I am really pleased to report that during the quarter, HALS sales volume scaled to approximately 190 tons per month while December exit rate was 200 tons per month. The HALS product offering continues to diversify with revenue contribution coming in from HALS 701, 770, 622 and the newly launched 944, 119 and 783. During the quarter, Company commercialized 2 new products, DHDT, a pharma intermediate which is used to manufacture Lamivudine. Company is a key domestic manufacturer of DHDT, leading