Pondy Oxides and Chemicals Ltd Q1 FY23 Earnings Conference Call Insights

Key highlights from Pondy Oxides and Chemicals Ltd (532626) Q1 FY23 Earnings Concall

Management Update:

• POCL said that to counter macroeconomic forces, its core focus going forward will be on portfolio diversification in non-ferrous metals and other recycling materials in the upcoming quarters.

• POCL expects its growth in volumes as per the previous projections of 18% to 20%. The company added that it intends to go live with Ace Green Recycling modules in 3Q23, post commissioning.

• POCL expects to invest in recycled plastics that it intends to use in its manufacturing process. These investments will be through internal accruals and targeting a production capacity of 24,000 tons per annum in the first phase.

Q&A Highlights:

• An analyst asked about the drivers of growth YoY on revenue and profitability and the outlook for FY23. Ashish Bansal MD said that the company increased its portfolio on value added products that helped in growth. For the remaining quarters, POCL said that with current geopolitical tensions, it is well equipped to withstand and mitigate risk.

• An analyst enquired if the bonus issue would boost the liquidity of the stock.  K. Kumaravel Director Finance replied that with the issue of bonus the current share count is doubled and with higher supply, liquidity will be higher.

• An analyst also asked about the company’s M&A and expansion plans. Piyush Dhawan President replied that now it’s focused on diversification and POCL is very confident that plastics vertical will contribute significantly to POCL growth on a consolidated basis. On M&A, POCL said it might look at companies in its field of interest as part of the inorganic growth strategy both domestically and internationally.

• An analyst asked about capex funding plans. K. Kumaravel Director Finance answered that currently POCL is debt free and has internal accruals of over INR200 crore. POCL added that it is planning to invest INR90-120 crore in different projects, greenfield and brownfield over the next 2-3 years through internal accruals.

• Rohit Ohri of Progressive Share asked about the plastic business plans. Piyush Dhawan President replied that POCL has an inherent capacity to process 300-400 tons of material every month. The company is planning to scale that to 2,000 tons per month. The target products will be polypropylene co-polymer, ABS, and much of the industrial plastics in the segment.

• Rohit Ohri of Progressive Share enquired if POCL will go ahead and make its own battery unit in the long run. Piyush Dhawan President clarified that POCL is going to be manufacturers and recyclers. Recycling will be the core domain. The company is venturing into other non-ferrous metals and plastics. However, POCL won’t be manufacturing battery as an end product.

• Rohit Ohri of Progressive Share asked that in non-ferrous, which metals it’s looking into. Piyush Dhawan President said that the company is looking into aluminum aggressively and is into closing stages of rolling out some information shortly.

• Rohit Ohri of Progressive Share enquired about the returns from the capex spend in the next 2-3 years. Piyush Dhawan President answered that POCL’s portfolio mix is diverse. In non-ferrous, POCL is expecting returns of 8-10% and even higher returns on plastics. The company is not targeting anything less than 15%.

• Vijay Sarda from Crescita asked about the ROI from the investments in plastics or other materials. Piyush Dhawan President said that for plastics and non-ferrous, the payback period is 18-24 months. For R&D and commercialization, it’s also of the same 18-24 months.

• Vijay Sarda from Crescita enquired about the copper ramp up timeline.  Piyush Dhawan President replied that there will be a change in approach in copper and POCL will start scaling it up only from next year once plastic and green lead operation is stabilized. But added that copper will be a primary focus next year.

• Rohit Ohri of Progressive Share asked about other geographies of expansion other than south India. Ashish Bansal MD said POCL is looking at western region, closer to the port, probably around Gujarat and such regions to cater more towards the Middle East and European side of the market.