Concall Summary: SRF Q4FY20

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Business Update

  • Segmental business
    1. Specialty chemical business has been the key growth driver and there was strong demand from export market for the products
    2. There was no demand related issue but logistic issues led to some delays till mid April from last week of March
    3. Health demand from agro and pharma sectors the business is ready for more opportunities in future
    4. Revenues from specialty chemical business touched Rs 1650 crores  and the business also showed good margins with operating leverage playing out
    5. Order book for FY21 looks good and this business should do well in the current year also
    6. The demand for refrigerants should remain low but when markets open up there should be an upswing in the domestic market
    7. Developing newer export markets for its fluorochemical business and working hard in the US market with all retailers
    8. Witnessed strong performance from BOPP & BOPET segment as the company continues to improve efficiencies in this business
    9. Even during the lockdown the packaging plants were operating at reasonable capacity
    10. Operating margins in packaging segment will moderate as newer lines in domestic and export market will come up
    11. The commissioning of Hungary project was delayed ue to spead of Covid in the country and this will now be commissioned in H2FY21
    12. The performance of NTCF has been affected due to subdued demand in domestic market 
    13. In coated and laminated fabrics business there was a stable performance due to introduction of newer products
  • Taxes were lower for the year due to remeasurment of deferred tax due to notification of a lower tax rate
  • The net debt in FY20 was higher by Rs 300 crores
Also Read on FinMedium:  Concall Summary: VIP Industries Ltd Q4FY20

Participants

  • ICICI Securities
  • DSP Mutual Fund
  • Oldbridge Capital
  • Nippon AMC
  • Edelweiss
  • MOAMC
  • EMKAY Global
  • Alfaaccurate Advisors

QnA

  • There are certain capex plants that have already been announced and the company is moving ahead with that and around Rs 700-800 crore capex will be spent in FY21. Alongwith this BOP & BOPET capacity total capacity expansion will be to the tune of Rs 1200-1300 crores
  • The debt reduction over next one year should be to the tune of Rs 200- 300 crores
  • The company feels it is at an advantage because many white goods manufacturers are moving from R22 to R 34 and that will lead to better capacity utilisation
  • The technical textile busines should not see high growth but continue at a stable rate going forward
  • The blended cost of debt is around 3.5% – 3.75%
  • The share of value added products in the packagaing films business and the growth is in region of 20-22%
  • There are some enquiries for the pharma chemical segment but it is difficult to predict when will that fructify into deals
  • The enquiries in the packaging business are very strong and the only thing is that capacity in Europe takes some time to ramp up
  • Not intending to manufacture sanitizers going forward to diversify some manufacturing capacity
  • A lot of the customers in Europe and US are wanting to diversify production away from China and the company is very well placed with manufacturing capacity to cater to that demand
  • Within the next two years all the additional capacity that is being put up should be put up to use
  • As the specialty chemical business increases in size growth as seen in the past will not be possible and should moderate on a higher base going forward
  • The overall imports from China are not very substantial but there is no specific though on backward integrating some processes
  • Around 5 new lines will come up as capacity with 14000 tons per line in BOPET over the next few quasrters across the industry
  • The capacity utilisation in the refrigerant business is around 70-75%
Also Read on FinMedium:  Concall Summary: Granules India Ltd Q1FY21

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Karan Sharma
The Concall Summary Guy | CFA | Investor
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