Clean Science and Technology Limited Q4 FY24 Earnings Conference Call Insights

Key highlights from Clean Science and Technology Limited (CLEAN) Q4 FY24 Earnings Concall

• Volume Recovery
  • Recorded volume growth on annual and sequential basis in Q4 FY’24.
  • Volumes recovered during H2 FY’24 after declining in H1.
  • Volumes surpassed previous levels in Q4 FY’24.
• Financial Performance
  • Sales grew 16% Q-o-Q, driven by 23% volume increase, offset by 7% lower realizations.
  • EBITDA grew 14% Q-o-Q to INR 99 crores, with margin at 44%.
  • Profit grew 20% Q-o-Q.
  • Y-o-Y sales grew 4%, but EBITDA declined 6% due to lower realizations.
  • Recommended final dividend of INR 3 per share, total dividend payout ratio increased to 21.4%.
  • In FY’24, 36% of revenue came from the Indian market.
  • Rest of the revenue is from exports to various geographies.
  • Other expenses of INR 41 crores/quarter has stabilized for parent company.
  • To increase for subsidiary as new plants get commercialized.
• Product Segments
  • Performance Chemicals segment contributed 67% to revenue.
  • New products like HALS 770 and 701 saw 40% volume-led sales growth.
  • Pharma and Agro segment (19% of revenue) declined due to lower Guaiacol sales in H1.
  • FMCG segment (13% of revenue) contributed positively to growth.
• Capex and Expansion
  • Incurred record capex of INR 235 crores in FY’24, including INR 215 crores in subsidiary.
  • Commercialized operations at subsidiary CFCL, set up pilot facility.
  • On track to commercialize Pharma Intermediates capacity by Q3 FY’25.
  • Analyzing trial runs for new Performance products to plan next capex.
• CFCL Operations
  • CFCL was commercialized in March 2024.
  • Based on past asset turnover of 2.5-2.7x, CFCL’s topline is expected to be around INR 800 crores in 2-3 years.
  • Initial target market for CFCL’s products is the Indian market, which has huge imports of UV stabilizers.
  • Company has started exporting CFCL’s products to Europe as well.
• HALS Products
  • For HALS 701, approved by almost all major global customers.
  • Starting commercial shipments, expected to reach 1000 tons/annum in 3-5 months.
  • For HALS 770, already have 50% share of 200-250 ton Indian market.
  • Targeting 60-65% share in next 3-4 months.
  • Pricing at 2.5-3% discount to imports with just-in-time supply advantage.
  • Targeting 200 tons/month for HALS 770 by March 2025.
  • Export market approvals expected in 3-6 months timeframe.
  • Global pricing at max 5% discount to competitors for 770.
  • Targeting 15% margins for new HALS products initially due to competition.
  • Long-term aim for 25% margins at subsidiary after scale-up over 2-3 years.
• Inventory/Receivables
  • Inventory levels in line with last year in absolute value terms.
  • Increase Q-o-Q due to higher sales in Q4.
  • WIP stock also higher, but raw material/finished goods less than 30 days.
• Capacity Utilization
  • Performance chemicals segment at 70% utilization in Q4.
  • Pharma segment also around 70%.
  • FMCG (4-MAP) at higher 75% utilization.
  • Operating at optimal utilization levels of 70-75% across segments.
  • Limited scope for higher volumes from existing product capacities.
• Geographic Mix
  • Indian market growing due to new products like 770.
  • Domestic growth driven by new Pharma Intermediates, FMCG products.
  • Europe/N.America steady for existing products. Growth expected from new HALS products.
  • Flattish volumes in Europe Y-o-Y as growth in new products offsets dip in existing ones.
  • Volume recovery expected after destocking, led by new capacities and Pharma product from Q3 FY25.
• HALS Capacities
  • Common feedstock capacities of 10,000-12,000 tons already installed.
  • Downstream capacities for specific products already in place for next 2-3 years.
  • Utilization guidance of ramping up to 5000 tons still stands over 3 years.
  • Should see 3000 tons by March 2024, mainly from 770 initially.
• Pharma Capex/Margins
  • INR 30 crore capex for Pharma Intermediates in Q3 FY25.
  • Additional INR 150 crore capex based on pilot plant trials.
  • Margins expected to be better than HALS business.
• Export Strategy
  • Value proposition is geographic advantage of being non-Chinese, non-European supplier.
  • No major competitive threats seen from Chinese players yet in company’s product range.