Pondy Oxides and Chemicals Ltd Q3 FY24 Earnings Conference Call Insights

Key highlights from Pondy Oxides and Chemicals Ltd (POCL) Q3 FY24 Earnings Concall

• Financial Performance
  • Revenue of INR 454 crores, up 16% YoY and 12% QoQ.
  • YTD revenue of INR 1,168 crores, up 13%.
  • EBITDA at 6.04% in lead vertical.
  • Overall EBITDA at 5.4% due to aluminum and expenses.
  • Current ratio at 1.47 and debt equity at 0.83.
• Lead Acid Battery Outlook
  • Global market growing steadily at 6% CAGR.
  • Asia Pacific dominates with over 50% share.
  • India’s share increasing year-over-year.
  • Circular economy driving reuse and recycling.
  • Overall positive future outlook.
• Capacity Expansion
  • Increasing lead capacity from 132 KTPA to 204 KTPA.
  • Acquired facility in Tamil Nadu.
  • Machinery procurement initiated; installation from June 2024 and commissioning by September 2024.
  • Looking to significantly expand capacities across business verticals.
• Tamil Nadu MoU
  • MoU to set up recycling and manufacturing plants for non-ferrous metals, batteries, paper, plastic, rubber.
  • INR 300-500 crores investment over 5 years.
  • Additional INR 750 crores revenue in phase 1.
• Growth Roadmap
  • Expanding lead capacity currently.
  • Strengthened plastic and aluminum verticals.
  • Exploring lithium-ion, rubber, paper recycling.
  • New verticals to progressively add to revenue.
  • Prudent investments based on feasibility.
• Capex Funding
  • INR 133.5 crores raised via preferential allotment.
  • INR 70 crores to be utilized before March 2024 for lead capacity expansion in Tamil Nadu.
  • Future needs to be assessed based on business scenario.
  • No debt funding planned currently.
  • Improved profitability with revenue growth.
• Working Capital and Sales Mix
  • Working capital of INR 275 crores in Q3 FY24 vs INR 240 crores in Q3 FY23.
  • Increase due to higher inventory and debtors, driven by aluminum vertical.
  • Sales mix of 45% domestic, 55% exports currently.
  • Additional verticals to expand domestic share.
  • Leveraging diverse product portfolio.
• Product Mix
  • 35% pure lead sales currently.
  • 65% value-added alloy products.
  • Custom alloys for specific customers.
  • Similar mix expected going forward.
• Growth Outlook
  • Current year revenue around INR 1,474 crores.
  • Next year estimate INR 1,700 – 1,800 crores.
  • 20% growth potential in FY25, driven by capacity expansion.
• Margin Outlook
  • Current EBITDA around 6% in lead division.
  • Expect over 7% in new Tamil Nadu facility.
  • Overall margins to improve with expansion.
• EPR and Battery Rules
  • EPR still at nascent stage.
  • Battery rule registrations ongoing.
  • Commercial opportunities in 3-6 months.
  • Software development delays in Tamil Nadu.
  • Progress expected in 6-9 months.
• Lithium-ion Battery Recycling Update
  • Currently evaluating techno-commercial feasibility of lithium-ion recycling.
  • Made some progress on R&D but still at early stages.
  • Key is to ensure continuous supply/procurement of used batteries.
  • Expect to see more developments in next 2-3 years as recycling becomes imperative.
  • R&D work is advancing to develop recycling tech in preparation for expected growth in this space.