Clean Science and Technology Limited Q3 FY22 Earnings Conference Call Insights

Key highlights from Clean Science and Technology Limited (CLEAN) Q3 FY22 Earnings Concall

Management Update:

• CLEAN said it will continue to increase its Indian and International customer presence as the company is adding new products to the basket and consequently adding new customers in Indian and overseas markets.

Q&A Highlights:

• Sanjay Sheer from ICICI asked that on PBQ and TBHQ, what’s the import substitution opportunity for PBQ in India. Siddharth Sikchi Director said that PBQ has a very good India market, which has short supply with only two players manufacturing it in China. TBHQ is an export potential market and it will add to AFFLE’s current basket of BHA and ascorbyl palmitate.

• Sanjay Sheer from ICICI also asked if there are any more products in the anti-oxidants that is required to further strengthen the anti-oxidant portfolio. Siddharth Sikchi Director said AFFLE would want to add another product called phenothiazine, which is a very important antioxidant but the company has not been successful yet in developing this technology. But the company is fiercely working on it.

• Sanjay Sheer from ICICI enquired about the import India does on PBQ and what’s AFFLE’s capacity. Siddharth Sikchi Director answered that it’s 70 tonnes a month for India and FFLE’s capacity is only 40 tonnes. The company has decided to do it in two phases. The building is setup, but only phase I is put up of about 40 tonnes and the company is confident with its product and now it’s ordering for Phase 2 and doubling the capacity to 80 tonne which will take about 3 months from today.

• Krishan Parwani of JM Financial asked if the company plans to make HQ in-house. Siddharth Sikchi Director answered that it will be interesting to see this market for the next six months and if the company feels a real need, it would consider making it in house. But if it’s a crowded market, it is better to buy HQ and make the end products.

• Krishan Parwani of JM Financial enquired about capex going up in FY22 and if it will go up in FY23-24. Siddharth Sikchi Director said it will further go up because the company’s Unit 4 will start, which is a greenfield project and it’s a 3-4 acre plot. Therefore, it will be one of the biggest capex in the history of the company, in a range of more like INR200 crore per annum.

• Rithik Sharma  of Edelweiss asked about the capacity utilization in 3Q22. Siddharth Sikchi Director replied that DCC is the most underutilized plant at this stage, operating in the range of 30-35%. Rest of the products are operating north of 65-70%.

• Faisal Hawa with H.G Hawa asked about the client concentration and how much does the top 5 clients contribute to total revenue.  Pratik Bora CFO replied that top 5 clients contribute close to 35% of the topline during 3Q22.

• Faisal Hawa with H.G Hawa also enquired if it’s right to assume that the company’s internal target is to double revenue every three years. Siddharth Sikchi Director said that growing at about 25-30%, AFFLE should be able to double the revenue every three years.

• Faisal Hawa with H.G Hawa asked  if the company faces any difficulty hiring personnel for different departments. Siddharth Sikchi Director said that with the company’s ESOP schemes, it is helping AFFLE to retain good people and new people are also coming in. Also Pune is a hub not many chemical companies are there and it’s an advantage for the company.

• Prasenjit Bhuiya of Kotak asked that in hydroquinone if the company is planning to enter into other products. Siddharth Sikchi Director answered that in hydroquinone base the company has only two products and so far that’s the only things AFFLE has on its plate.

• Prasenjit Bhuiya of Kotak also asked about the timeline for capacity ramp up utilization for next two years for exiting products. Siddharth Sikchi Director said that the company has already done a 50% ramp up in BHA, and MEHQ is closer to 40% ramp up. And the utilization on the new capacity will be existing plus 1.4 times. For the incremental capacity AFFLE is looking at 50-60% of utilization in the first year itself, except for the new products.