Categories Concall Highlights, Earnings, Other Industries

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.

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