Pondy Oxides and Chemicals Ltd Q4 FY22 Earnings Conference Call Insights

Key highlights from Pondy Oxides and Chemicals Ltd (532626) Q4 FY22 Earnings Concall

Management Update:

• POCL said it achieved an all-time highest topline of INR1,455 crores vs. INR1,004 crores the previous year. And also crossed a turnover of $100 million in exports for FY22. POCL is seeing the future outlook of the industry to be relatively positive.

• POCL’s focus would be sustainability of the results in the coming quarters to withstand macro-economic factors. Diversification of portfolio in nonferrous metals and other products will also be the focus area in the coming years.

Q&A Highlights:

• An e-mail questioner asked about the target growth percentage in FY23 in terms of EBITDA and operating margin. K. Kumaravel Director Finance said considering the current trends, POCL is expecting an EBITDA margin of 6-6.5% and operating margin of 11-12% in FY23.

• An e-mail questioner asked about project pipeline for FY23. Piyush Dhawan VP Commercial said that POCL is seeing headway in verticals, like plastics, other non-ferrous metals, e-waste, rubber recycling, and lithium ion. POCL added that based on such upcoming opportunities, the company is seeing some positive headway into such products in the coming months and years.

• An e-mail questioner enquired about the impact of Russia-Ukraine conflict on the company. Ashish Bansal MD answered that the impact was indirectly felt only in the costing of POCL’s processes due to increase in oil price, freights and other allied services.

• Sachin Abhyankar asked about Q-o-Q dip in profitability and if there was any one-off expenses in Q4. K. Kumaravel Director Finance replied that profitability is almost similar to all the quarter, except the last quarter. POCL added that always it’s a balancing figure between the last three quarters and the audited results.

• Vaibhav Badjatya of HNI Investment asked about capacity in metric terms, separately between refining and smelting. Piyush Dhawan VP Commerical said that right now for lead, POCL has finished goods capacity of 132,000 tons per annum for smelting. Copper, the standard capacity is 30,000 tons per annum and Zinc 12,600 tons per annum.

• Vaibhav Badjatya of HNI Investment also enquired that for importing scrap, what is the quantity of import capacities available to POCL. Ashish Bansal MD answered that both the units combined, POCL has approx. capacity little excess of 90,000 metric tons that it can import.

• Vaibhav Badjatya of HNI Investment asked about imports from U.K. and non-U.K. EU countries. Ashish Bansal MD replied that specifically from U.K., POCL imports maybe maximum of about 7-8% of its requirement. Off late, POCL said it is also slowly increasing its domestic procurement and procurement from countries closer to India.

• Vaibhav Badjatya of HNI Investment asked about the potential scale up available in MMPL. Piyush Dhawan VP Commerical replied that there is a possibility to scale-up capacities, but it works on various permutation and combinations.

• Vaibhav Badjatya of HNI Investment asked about margin improvement due to scaling up of smelting capacity, if it is MMPL scale up or some other unit. Piyush Dhawan VP Commercial answered that MMPL was a completely integrated unit with smelting and refining both available and the increase in smelting capacity was made in both the units in FY22, partly.

• Karan Asli from Maximal Capital asked about revenue and volumes across lead, zinc and copper. K. Kumaravel Director Finance said that total quantity produced for the year was close to 70,000. And it is almost equal in all the quarter. Copper, produced was immaterial about 255 tons during FY22.

• Ankit Sharma asked if the customer contracts include any kind of a price escalation. Ashish Bansal MD replied that contracts does include price escalation that started mid-term after the contracts were negotiated last year in terms of oil prices, power fuel and other additive costs because of the supply chain disruption.

• Ankit Sharma also asked if POCL expects any kind of operating margin improvement in 1Q23. Ashish Bansal MD replied that POCL is not seeing any downside in the 6% to 6.5% margins that it has committed.

• Ankit Sharma asked about the revenue growth number for FY23, if it will be like the steep growth seen in FY22. Piyush Dhawan VP Commercial replied that revenue will grow for lead at a CAGR of around 20-25%. It may fluctuate based on the business scenarios. And since POCL intends to enter into different verticals, there would be some growth coming from there as well.