Key highlights from IOL Chemicals and Pharmaceuticals Limited (IOLCP) Q4 FY22 Earnings Concall
Management Update:
- IOLCP is optimistic on its pharma segment as capacity for other potentially large projects are ready. Gross margin in this segment is expected to improve with improved business mix.
Q&A Highlights:
Dhaval Shah – Svan Investment – Analyst
- Reason for chemical business reporting loss at the EBIT level and outlook going forward?
Sanjay Chaturvedi – Chief Executive Officer
- Primary product ethyl acetate depends on acetic acid that comes all from exports.
- Had a lot of volatility in acetic acid pricing.
- The numbers should be seen from a quarterly or yearly perspective since the time of placing the order, to utilization of RM takes at least two months.
- On an annual basis, IOLCP will continue to make 6-8% EBITDA in this business.
Dhaval Shah – Svan Investment – Analyst
- Change in capacity in the chemical business today vs. the next three years?
Sanjay Chaturvedi – Chief Executive Officer
- Existing capacity is about 1 lakh tons from Ethyl Acetate.
- Over the next couple of years, will have marginal expansion of about 20%, 25%.
- This will be through minor modification of plants.
- In the process of identifying new products for which capacities will be added.
- Should come on line around next year.
- Most of chemicals business growth will come from non-ethyl acetate products.
Dhaval Shah – Svan Investment – Analyst
- Reason for Ibuprofen volumes being less in 4Q22?
Sanjay Chaturvedi – Chief Executive Officer
- The overstocking from previous year from some key accounts has still not been eliminated.
Rohit Suresh – Samatva Investments – Analyst
- Demand in the regulated market for Ibu?
Sanjay Chaturvedi – Chief Executive Officer
- Assets are running at 70% or so utilization.
- Should add a few percentage points to this in coming quarters.
- IOLCP might not sell at full capacity, but at a higher capacity than the previous year.
Rohit Suresh – Samatva Investments – Analyst
- Would Ibu prices increase in FY23, once the overstocking issue gets solved.
Sanjay Chaturvedi – Chief Executive Officer
- It should probably go up.
- Input cost of all RMs are going up, energy costs doubling, Russia-Ukraine war etc.
- Once input costs go up, the price of final product also goes up, probably in a phased lag.
Ranvir Singh – Sunidhi Securities – Analyst
- Ethyl Acetate business split geographically; India vs. export.
Sanjay Chaturvedi – Chief Executive Officer
- Ethyl Acetate business primarily is still domestic for IOLCP.
Chirag Fialoke – Ratna Traya Capital – Analyst
- Ibuprofen volume for FY22 vs. FY21?
Sanjay Chaturvedi – Chief Executive Officer
- IOLCP declined by almost a 1000 tons for the year.
- Volumes were closer to the range of 8,000 tons, 8,300 tons.
Anupam Agarwal – Lucky Investment Managers – Analyst
- Paracetamol capacity and volume for IOLCP?
Sanjay Chaturvedi – Chief Executive Officer
- Currently having a capacity of 1,800 tons a year.
- Expect this to be about 3,600 tons by the end of FY23.
Anupam Agarwal – Lucky Investment Managers – Analyst
- Reason for the jump of INR185 crore in other non-current assets in consolidated balance sheet?
Sanjay Chaturvedi – Chief Executive Officer
- The FD that was in the short-term has been moved into long-term, which is sitting in other non-current assets.
Aditya Shah – Individual Investor – Analyst
- Expected margins on the API non-ibuprofen business?
Sanjay Chaturvedi – Chief Executive Officer
- Current margins are in the single digits.
- Asset utilization still continues to be low in the range of 50%, 60%.
- Expects to take it to 75%, 80% level in the next 12-18 months.