AMI Organics Ltd Q4 FY23 Earnings Conference Call Insights

Key highlights from AMI Organics Ltd (AMIORG) Q4 FY23 Earnings Concall

Management Update:

• [00:04:33] AMIORG said it saw gradual demand upswing in 1H23, with expectations of continued revival in 1H24.

Q&A Highlights:

• [00:14:16] Chirag Lodaya at Valuequest asked about margin outlook and FY23 margin for specialty chemicals and advanced intermediate divisions. Bhavin Shah CFO said that FY23 margin was 27.57% for pharm and 10.3% for specialty. AMIORG plans to maintain the 23% margin achieved in 4Q for the pharma business and improve the specialty business margin by 50-100 basis points QonQ.

• [00:15:33] Chirag Lodaya of Valuequest queried about the outlook for MIORG’s specialty chemical division in terms of ramp-up and growth drivers. Naresh Patel MD said the company is focusing on its specialty chemical division and has developed 20 new molecules in this segment. AMIORG is targeting 25-30% growth in the specialty chemical division this year vs. 20-25% growth in pharma division.

• [00:16:59] Chirag Lodaya from Valuequest asked about the overall opportunity size of Baba Fine Chem. Naresh Patel MD said that AMIORG acquired a majority stake in Baba Fine Chem as the market for photoresistance chemicals is large and growing, and AMIORG believes that it can help Baba Fine Chem grow its business by providing operational support and access to its larger customer base.

• [00:18:42] Chirag Lodaya from Valuequest enquired about the capex for FY24. Naresh Patel MD said that the company has ongoing capex plans for FY24, AMIORG is currently planning to invest in additional capacity for electrolyte additives in 2H24 and will announce additional plans for capacity expansion in the 2H24 once the company is ready.

• [00:20:07] Mitul Mehta from Lucky Investment asked about the plan to scale up the specialty chemicals business and improve ROC in the next 2-3 years. Naresh Patel MD said that the company acquired Gujarat Organics in 2021 and has since been working to consolidate and grow the business. The company has developed new products and increased capacity, and is targeting 2.5 times revenue growth in the next 2-3 years.

• [00:20:57] Mitul Mehta from Lucky Investment enquired about the timeline and scope of the Fermion contract. Naresh Patel MD replied that AMIORG has signed a long-term contract with Fermion to supply an intermediate for their patented product. The contract will start in 3Q24 and will generate significant revenue for AMIORG. The full capacity supply will start in FY25. The contract also includes 3 additional products that will help AMIORG grow in the future.

• [00:29:09] Sudarshan Padmanabhan from JM Financial enquired if the 20-25% growth guidance for the pharma business is conservative. Naresh Patel MD said AMIORG is proactively planning for future growth by expanding capacity and developing new products. The company is confident of achieving its growth guidance for FY24, FY25, and FY26.

• [00:33:42] Sudarshan Padmanabhan from JM Financial enquired how has AMIORG been able to reduce working capital and what is the target working capital days. Naresh Patel MD replied that AMIORG is working to reduce its working capital cycle from 108 days to 100 days. The company is improving inventory management, getting more credit from suppliers, and reducing receivable days.

• [00:36:20] Rikin Shah with Omkara Capital enquired how AMIORG plans to manage its anticoagulants portfolio in the face of generic competition and a potential shift in treatment from apixaban to rivaroxaban. Naresh Patel MD said the company is well-positioned to benefit from the growth of the antiglobulin segment, regardless of whether rivaroxaban or apixaban is the leading treatment.

• [00:38:36] Rikin Shah of Omkara Capital asked about more information about the two new molecules that AMIORG is developing for the electrolyte market. Naresh Patel MD replied that AMIORG has developed two new molecules for use in high-voltage batteries and solid-state batteries. The molecules are under NDA and CDA with a customer. The molecules are qualified and AMIORG is in the process of obtaining larger scale manufacturing compliances.

• [00:43:11] Tarun Shetty at Haitong Securities asked for a time frame for when the company expects to start generating revenue from its electrolyte additives. Naresh Patel MD said the company expects to start generating revenue from its electrolyte additives in 1H24. The company has already received some orders, but is expecting larger orders in the coming quarters. AMIORG plans to club the production of these orders together to optimize efficiency.

• [00:43:46] Tarun Shetty at Haitong Securities asked about the revenue range over 2 year period for electrolyte additives. Naresh Patel MD said the revenue might range between $2-3 billion for industry. The U.S. and European countries’ ban on battery cells from China is an advantage for AMIORG and other Indian manufacturers, as it creates a demand for their products.

• [00:48:32] Rohit Nagraj from Centrum Broking enquired about the revenue potential of AMIORG’s continuous flow reactors (CFRs) in the next 3-4 years. Naresh Patel MD clarified that AMIORG don’t make CFRs, but uses multipurpose flow reactors to produce a variety of products. The company’s flow reactors are designed to be easily switched from one product to another, which helps to improve operating efficiency and minimize waste.

• [00:50:26] Aman Vij at Astute Investment asked about the contribution of anticoagulants to AMIORG’s revenues and the company’s outlook for the anticoagulants business in the next 2-3 years. Naresh Patel MD replied that the company’s well-distributed product basket ensures that no single product contributes more than 15% of total revenue, with the anticoagulant product basket currently accounting for 12% of total revenue.