Tatva Chintan Pharma Chem Limited Q4 FY22 Earnings Conference Call Insights

Key highlights from Tatva Chintan Pharma Chem Limited (TATVA) Q4 FY22 Earnings Concall

Management Update:

• For the first time, TATVA said, it crossed the revenue mark of INR400 crores, profit before tax of more than INR100 crores and exports revenue of INR300 crores.

• TATVA said it expects Q1 and Q2 of FY23 will see a weaker demand in SDAs, though the underlying demand of SDAs continues to remain very strong.

Q&A Highlights:

• Sanjay Jain of ICICI asked how does FY23 look like for SDA, if revenue will be same as FY22. Chintan Shah MD answered sthat TATVA expects more or less to maintain the revenues of SDA of FY22 as in FY23. As soon as semicon availability smoothens out, which should happen by Aug. or Sept. ’23, the demand should come back. Therefore, 1Q should be low, 2Q will see improvement, and 3Q, 4Q should see strong demand.

• Sanjay Jain of ICICI also asked if the company is prepared for the SDA pent-up demand. Chintan Shah MD replied that TATVA still continue to produce the SDA and the company is piling up on the inventory for this pent-up demand.

• Sanjay Jain of ICICI enquired about the timeline for commercial production for new product pipeline and the anticipated capex need for these products. Chintan Shah MD said that all these new products would require one conventional facility, which TATVA is already enhancing the capability, which will take care of that. And another thing required is continuous flow chemistry, which would require an investment of about INR75 crores over next 2 years of time.

• Jason Soans from Ashika Stock Broking asked about the 1.5 billion capex, when it’s slated to go on stream. Chintan Shah MD replied that the capex is running on schedule, probably not more than 7 days of delay is what TATVA expects. And TATVA expects to have this plant available for production from December of ’22.

• Jason Soans from Ashika Stock Broking asked about SDA sales for FY23 and FY24. Chintan Shah MD said that TATVA expects this segment to grow at the most rapid pace. Currently it’s just a small hiccup due to the unavailability of the key raw materials for the auto industry. Once this is through, then TATVA again will be back into a very high-growth situation with this particular product segment.

• Yash Shah from Investec India asked about flame retardants segment and its capacity. Chintan Shah MD replied that primarily TATVA intends to sell these into the East Asia market. With the new plant, TATVA will have a capacity of producing about 5,000 metric tons of flame retardants.

• Yash Shah from Investec India also asked if TATVA will still be able to reach revenues in FY23 in upwards of INR550 crores. Chintan Shah MD answered that TATVA expects the PTC segment to grow at a normal pace, where it has been growing at about 20%. In the pharma segment, TATVA expects about 30% to 50% growth. Electrolyte Salt segment will see a 4 to 5 times revenue growth. And flame retardants will be new revenues.

• Dhruv Muchhal from HDFC Asset asked about glyme market capacity and what TATVA is targeting.  Chintan Shah MD answered that glyme market is about 18,000 metric tons and TATVA is targeting about 3,000 metric tons.

• Dhruv Muchhal from HDFC Asset enquired about the flame retardant product and if there’s some integration benefit that TATVA is leveraging on. Chintan Shah MD replied that TATVA is supplying a catalyst for epoxidation to a multinational customer. And these people are into manufacturing. So, TATVA’s catalyst is being used to manufacture the raw material for the flame retardant.

• Archit Joshi from Dolat Capital asked that within bromine category, which is by volumes one of the largest application areas, how TATVA is going to procure bromine. Chintan Shah MD said TATVA is working with a couple of large bromine suppliers in India, as well as one internationally where the company intends to have some kind of a tie-up in terms of supply agreement consistency.