Brief Company Introduction
NGL Fine Chem, also known as NGL Fine-Chem Limited, is a company that operates in the specialty chemicals industry. It is based in India and is involved in the manufacturing and distribution of a wide range of fine chemicals and intermediates. NGL Fine Chem specializes in the production of specialty chemicals and intermediates used in various industries. Their product portfolio includes dyes, pigments, pharmaceutical intermediates, agrochemical intermediates, and other specialty chemicals. NGL Fine Chem emphasizes research and development to develop innovative products and stay at the forefront of the industry. Their R&D team focuses on process development, product improvement, and finding new applications for their chemicals.
Financial Highlights & Results
- Revenue from operations amounted to 73.89 Crores representing a 2.72% increase compared to the previous quarter and a 12.1% decrease year-on-year.
- The EBITDA stood at 12.97 Crores reflecting a robust growth of 32.2% quarter-on-quarter and 22.7% year-on-year.
- EBITDA margins improved to 17.55% recording an increase of 391 basis points quarter-on-quarter and 498 basis points year-on-year.
- Profit after tax is 9.32 Crores marking a growth of 43.6% quarter-on-quarter and 35.66% year-on-year.
- The management stated that for the next two quarters there is going to be a pressure on margins and the margins may move a little bit sideways plus minus 2%, 3% from where they currently are.
Investor Conference Call Highlights
- The management stated that the company maintained a trajectory towards sequential recovery in the business.
- The management stated that the ongoing European crisis and high inflation rates in certain countries have led to uncertainty among their customers, resulting in cautious behavior and inventory rationalization measures.
- The company has also been impacted by currency crises in certain regions notably among countries such as Turkey, Bangladesh, Egypt and Pakistan.
- The company introduced new product offerings and expanded their product portfolio to 24 products in the veterinary API segment and two in the human health segment.
- The management stated that they have temporarily slowed down its capacity expansion plans due to available spare capacity at its current site.
- The management informed that they have temporarily slowed down execution speed of capacity expansion plans
- The management stated that currently, there are 26 products that have been commercialized and are being sold. An additional six products are still in the laboratory and pilot plant stages of development. The goal is to increase the total product line to 35 products within the next two years.
- The management stated that Approximately 70-75% of the products are tropical disease products with limited demand in the US and Europe.Around 25-30% of the products have demand in the US and Europe.
- The current capacity utilization of the existing plant is around 75-80%.
- Revenue estimates for the new products range from 30 to 60 Crores for each product.
- The management acknowledges that both Chinese and Indian companies are impacting the market with increased supply, and the company is facing pressure from competitors globally.
- The existing capacity has a revenue potential of around 350-380 Crores.
- The management stated that raw material prices vary across different products, with increases ranging from 200% to 350% compared to pre-COVID levels. However, prices have been decreasing, and they currently range from 50% to 75% higher than pre-COVID levels.
- The company has plans for expansion and aims to register its products in Europe to access new markets. They expect to approach the European market through their new facility.
- The company aims to achieve EBITDA margins of 17% to 23% and considers 25% margins virtually difficult to meet.
- The company expanded its operations with the commissioning of the Tarapur facility and increasing outsourcing.
- The management stated that the Tarapur expansion project had an initial planned investment of 100 Crores, but due to inflation, it increased to around 140 to 150 Crores. As of March 31, 2023, the company had spent 31 Crores on the project and had no debt.
- The company is funding capital expenditure using internal accruals generated by business.
Analyst’s ViewEstablished in 1981, NGL Fine-Chem Limited manufactures and markets APIs, Intermediates and Finished Dosage forms for human and animal pharmaceutical products. It caters to various Indian and global companies with high quality and reliable products. The company has effectively stayed on track with their projected path of gradual recovery in their business, as they had previously expected and communicated. It is crucial to recognize that the demand for their products has remained relatively low. The operating conditions will continue to pose challenges in the coming two quarters. The speaker acknowledges the potential for increased outsourcing in the future if demand rebounds. The company views the current situation as a temporary setback resulting from heightened spending during the COVID period, rather than a lasting change.