Aarti Industries Ltd Q2 FY23 Earnings Conference Call Insights

Key highlights from Aarti Industries Ltd (AARTIIND) Q2 FY23 Earnings Concall

Management Update:

• [00:03:50] AARTIIND said it is seeing slower demand for products associated with end-user industries of dyes, pigment, etc. However, the company expects demand to recoup from 4Q23.

Q&A Highlights:

• [00:10:50] Aditya Khetan of SMIFS Institutional asked about the one-off impact by maintenance shutdowns in 2Q23. Rajendra Gogri MD answered that AARTIIND’s Nitro Toluene, PDA and Chloro Aniline volumes were impacted.

• [00:12:30] Aditya Khetan of SMIFS Institutional enquired if the company is benefiting from freight cost currently. Rajendra Gogri MD replied that freight cost is coming down in the current quarter, so in 3Q23 the cost will be coming down.

• [00:14:12] Vivek Rajamani with Morgan Stanley asked how the company is seeing RM sourcing side evolving in coming quarters. Rajendra Gogri MD replied that there was no significant impact of any nitric acid in 2Q. In 2H23 also not much impact is expected.

• [00:20:18] Abhijit Akella from Kotak Securities enquired about the volume growth number for 3Q23. Rashesh Gogri VC replied that the volume growth will be substantially flat due to the shutdown that was taken up.

• [00:20:50] Rohit Nagraj from Centrum Broking asked if AARTIIND saw any currency benefit as the export numbers sequentially were promising. Rajendra Gogri MD answered that in some of the pigment intermediates, AARTIIND is seeing some challenges but in other sectors, the company is not seeing much challenges for exports. The currency benefit was in the range of INR8-10 crores.

• [00:22:30] Rohit Nagraj from Centrum Broking enquired about the gross block number by FY22 end and the NCB volume number. Chetan Gandhi CFO said that gross block of FY22 should be around INR5,000 crores and NCB volumes was 20,276 for 2Q23.

• [00:23:24] Rohan Gupta from Nuvama enquired about the utilization level for 2Q23 on Dicamba intermediate? Rajendra Gogri MD answered that overall current quarter utilization is about 25% level. Progressively, it should go on increasing.

• [00:28:34] Meet Vora from Axis Capital asked about the stable number on working capital since it has gone up in 2H23. Chetan Gandhi CFO said that there is potential of that to reduce as some softness in freight rate and RM price is visible. On a value basis, AARTIIND expects some reduction to happen.

• [00:31:55] Mihir Damania from Ambit Asset asked about the growth target for EBITDA and profitability for FY24, FY25. Rajendra Gogri MD answered that current year target is around INR1,100 crores. So on a corresponding 25% CAGR, in two years targeting around INR1,700 crores.

• [00:32:24] Mihir Damania from Ambit Asset enquired about the potential profitability impact due to maintenance shutdown. Rajendra Gogri MD answered that it will be around INR15 crores.

• [00:34:10] Vishnu Kumar from Spark Capital asked about the major projects that will be getting capitalized in the next 18 months and capex for FY23. Rajendra Gogri MD replied that contract 3 will get capitalized and some other specialty chemical blocks and Nitro Chloro Benzene will get capitalized. AARTIIND expects capitalization of about INR1,000 crores in this year. And capex spend was INR557 crore in 1H23 and annually INR1,000-1,200 crores will be the capex.

• [00:41:16] Bobby J from Falcon Investments asked about dyes and pigments, what is the end-user industry that’s being affected. Chetan Gandhi CFO replied that it is textile, printing ink, and also coating for the automotive that got affected during last quarter.

• [00:50:00] Pujan Shah from Congruence Advisors enquired the volume growth if the maintenance shutdowns haven’t happened for 1H23. Rajendra Gogri MD said that overall it won’t be much different, maybe 2%, 3%.