Key highlights from Meghmani Finechem Limited (MFL) Q4 FY22 Earnings Concall
Management Update:
- MFL closed the year with highest ever revenue and PAT of INR1,551 crores and INR253 crores respectively, which is attributed to a volume growth of 20% and higher realization for all the products.
Q&A Highlights:
- Manish Jain of Moneylife Advisory asked about the demand outlook for ECH with respect to the domestic industry. Maulik Patel MD said currently the ECH is in its peak demand due to the infrastructure projects going on all over the world and demand picking up after the COVID situation. MFL expects this to remain the same for next one or two years.
- Manish Jain of Moneylife Advisory also asked about the ECH demand in terms of tonnage per year. Maulik Patel MD said that Indian demand is around 70,000 tons, 75,000 tons. In next one to two years, MFL is expecting to grow in more than double digit of the epoxy resin in Indian capacity. The demand probably in next financial year, will reach to more than 85,000 to 90,000 KTA in India.
- Rohit Nagraj from Emkay Global enquired about caustic imports and expectation of imports over the next few quarters. Maulik Patel MD replied that looking at the current situation, MFL believes that it’s going to continue doing exports from India for next couple of quarters at least.
- Madhav Dhanuka of Fintrust Capital asked about the debt repayment structure which is sequentially increasing YoY. Sanjay Jain CFO answered that MFL’s debt will be reduced substantially because it’s going to have round about INR142-150 crores repayment on a YoY basis. Looking at all these numbers, MFL said debt to EBITDA will definitely remain below 2%, which has already been 1.9 in FY22.
- Madhav Dhanuka of Fintrust Capital queried about capacity expansion. Maulik Patel MD said MFL announced three major projects. One is epichlorohydrin, second is a chlorinated PVC and third is the expansion of the caustic soda. In FY23, MFL is expecting to achieve volume growth close to 20%, which is coming from all these three projects.
- Madhav Dhanuka of Fintrust Capital also asked about how capacity expansion is helping improving margins and the products MFL is focusing in that capacity. Sanjay Jain CFO replied that the products that MFL is getting into like ECH and CPVC are high-value products. Margins will be in the line of what MFL are into like 28%, plus/minus 2% but this absolute EBITDA will improve the ROCE down the line.
- Riya Mehta with Aequitas Investments asked about the current cost of acquisition of the coal right now. Maulik Patel MD answered that what kind of GCV one is buying it depends on that. So it is very difficult to judge a per ton cost of coal.
- Riya Mehta with Aequitas Investments asked that going forward, does MFL see any different capacity utilization for caustic soda or decrease in ECUs. Maulik Patel MD said it is not the case, because caustic soda demand is growing year by year, it depends on the GDP of the country. So MFL believes that once in a year sizable caustic soda plant has to come in India which can easily absorb in terms of the chlorine, hydrogen or caustic soda.
- Niraj Mansingka from White Pine Investment asked about the difference between the realization of the exports and the domestic market for caustic. Sanjay Jain CFO said the export market is driven by so many factors. So it keeps changing. Majority of the time MFL gets higher realization in the domestic market and automatically if the export price is increasing automatically, the reflection in the domestic price is also coming of the caustic soda.