Key highlights from Clean Science and Technology Limited (CLEAN) Q4 FY22 Earnings Concall
Management Update:
All geographies and segments grew on a very healthy background. Increased new customers, increased wallet share with the existing customers, and launched some new products. Total revenue increased 34% YoverY and PBT and PAT grew 14% and 15%, respectively compared to the last financial year. Balance sheet continues to be debt free with a free cash of approximately INR250 crores. ROCE has remained at 52% and return on equity at 30%.
Q&A Highlights:
Harsh Shah – L&T Mutual Fund – Analyst
- Full year revenue growth breakdown in terms of volume and value?
Pratik Bora – Chief Financial Officer
- Does not typically share volume and value-wise number, but majority of the growth has come from volume.
- For BHA, the most margin-accretive product in portfolio, witnessed around 50% volume growth and around 7% to 8% realization growth.
Harsh Shah – L&T Mutual Fund – Analyst
- Explain the overall environment for the industry and specifically for Clean Science in terms of passing on these incremental costs?
Siddharth Sikchi – Executive Director
- Whole scenario is that company is passing some price difference to the customer.
- Trying to regain and increase wallet share with the same customer so that over the next few years, company is able to garner a better market share compared to its competitors.
Harsh Shah – L&T Mutual Fund – Analyst
- For the full year of FY22, how was the overall client addition?
Siddharth Sikchi – Executive Director
- First added two new products:
- p-BQ, which is called para benzoquinone.
- In products like BHA, added some new customers in Latin America.
- In MEHQ, added some customers in:
- South Korea.
- United States.
- Some large-scale customers who were buying minority purchases have now moved to majority purchases in this coming financial year.
Sanjesh Jain – ICICI Securities Ltd. – Analyst
- Why has other expenses risen sharply?
Pratik Bora – Chief Financial Officer
- Coal prices have increased 77%, which in turn has led to power and fuel cost increasing by around 106% on year-on-year basis.
Ankur Periwal – Axis Capital Limited – Analyst
- Where will Clean Science be from a pricing point of view in the new range of products that it plans to launch next year?
Siddharth Sikchi – Executive Director
- Energy prices have gone up for the company, but not to the extent as it has gone up for European producers or an American producer.
- This delta will definitely be of very big importance to the company.
- There were a lot of rumors also in the market that Germany or Europe, in particular, will have a lot of industrial shutdown to first cater to the residential needs of energy.
Ankur Periwal – Axis Capital Limited – Analyst
- On the existing portfolio, what is the price differential versus competition?
Siddharth Sikchi – Executive Director
- Competitors are unable to price higher than Clean Science’s price.
- They have to match price or they will lose the customer.
- Clean Science’s prices are in a range where it is still making decent money and where competitors are unable to make substantial margins.
- Clean Science hopes to get more market share in this environment.
Abhijit Akella – Kotak Securities Ltd – Analyst
- Any margin outlook for FY ’23 just given the input cost scenario and the fact that Clean Science are focusing more on wallet share gains rather than on margin protection at this point?
Siddharth Sikchi – Executive Director
- Business looks robust.
- Seeing volume growth across all segments.
- Very difficult to predict what raw material prices will be going forward in the next three months.
Abhijit Akella – Kotak Securities Ltd – Analyst
- Taking a slightly longer-term perspective, like say three, five years once the new products are optimally ramped up, will margins return to the levels that they have been at in the previous year?
Siddharth Sikchi – Executive Director
- Previous year would be very difficult.
- Those were really the COVID years where the prices of raw materials really went down dramatically and was also a very special situation.
Rohit Nagraj – Emkay Global Financial Services Ltd – Analyst
- For HALS, capacity will be coming up in 2H and once capacity is commissioned, will product sales start or will there be product validation from the plant?
Siddharth Sikchi – Executive Director
- There is always a validation process.
Rohit Nagraj – Emkay Global Financial Services Ltd – Analyst
- 70% of sales are exports. How much of these are long-term in nature, yearly contracts? Any clause or so on a quarterly basis for pricing reset?
Siddharth Sikchi – Executive Director
- Multiple ways in which an order is booked.
- Yearly contracts are rare and then comes half yearly and then comes quarterly.
- In India, it is a monthly basis.
- Clean Science is really with all contracts.
Rohit Nagraj – Emkay Global Financial Services Ltd – Analyst
- Are there any deferment of contracts or orders or simultaneously probably a benefit because someone else is having a challenge?
Siddharth Sikchi – Executive Director
- Energy costs for European competitors have dramatically increased over the past few months, which has given Clean Science an advantage.