Fairchem Organics Ltd Q1 FY23 Earnings Conference Call Insights

Key highlights from Fairchem Organics Ltd (FAIRCHEMOR) Q1 FY23 Earnings Concall

Q&A Highlights:

• Raj Shah of Statheros Holdings asked about the sustainability of 1Q gross margin of 36-38% going forward. Nahoosh Jariwala MD replied that the company believes it’s sustainable because of economy of scale and forward integration of two product streams.

• Raj Shah from Statheros Holdings enquired that since the company has completed majority of its capex if capacity utilization can reach 70-80% by FY25. Nahoosh J MD clarified that in its industry the capacity expansion and utilization time lag is minimum 3 years. Currently utilization now is 65-70%, which every year would increase by 10-15%. In next 3 years, FAIRCHEMOR will reach full capacity utilization.

• Raj Shah from Statheros Holdings asked about the revenue and margin profile expectation from the biodiesel project. Nahoosh J MD said that the project will go to operation by end of 2022. In this year the company won’t see any major impact, but next year advantages will be seen.

• Trilok Agarwal with Dymon Asia asked that with the expanded capacity recently, if it’s fair to assume that the historical asset turnover ratio will continue. Nahoosh J MD said that the ratio is expected to go up because whatever expansion is done it’s done doing minimum capex. So the asset turnover ratio is expected to improve every year.

• Sunil Jain with Nirmal Bang enquired that since the company is the only producer of Dimer and Linoleic, if it competes with import. Nahoosh J MD replied that the company competes from imports in Dimer that mainly comes from China. However, FAIRCHEMOR is steadily increasing market share in it.

• Dhaval Shah from ICICI Securities enquired that given edible oil prices were higher during 1Q23 if there were any inventory gains that lifted GM. Nahoosh J MD replied that the prices did not help GM. The company said that it’s a manufacturing company and don’t play around in commodity pricing and added that no gain or loss happens from inventory or finish product.

• Nirag Shah of Exemplar Investment asked that out of the 120,000 metric tonne per annum capacity, how much is dedicated specifically for processing DOD. Nahoosh J MD replied that the capacity creation done by the company has a swinging ability. So FAIRCHEMOR can swing its equipment from one raw material to another.

• Krunal Shah with ENAM asked about the end applications for isosteric acid. Nahoosh J MD answered that its applications are in cosmetics, aviation fuel, and sun screen lotion. The market is increasing for this as it’s a green product.