Analyst Meet / AGM - Analyst Meet
Aims to grow at CAGR of around 20% for next 5 years from the continuing business
In interaction with MD Mr Deepak Parikh
Key highlights
The continuing business of the company comprises of pigments, colors, dye chems, master batches and other specialty chemicals. These products are a mix of specialty chemicals and generics
The user industry of the company now comprises of textiles, construction, packaging, healthcare, pharmaceuticals, cosmetics and others. Most of these industries are doing well for the company.
The new carbon black facility will be coming up on stream in FY'17. Management aims to sell activated carbon black which has higher sales realization compared to normal carbon black. The activated carbon has a huge demand in pharmaceutical industry.
Exports contribute around 27% of total sales and have been growing in double digits for past couple of years now. Parent has identified Indian subsidiary for its sourcing requirements and is open for further outsourcing. Management expects the exports to stabilize around 30% of total sales of the company unlike around 18-20%, some 5 years back.
The company has reached the first mile stone of reaching operating profit margin of around 8-9%. Gradually in the next 5 years, management aims to reach its normal operating margin level of around 13-14%. Through a mix of high value added product sales, higher and diversified user industry base, higher exports, higher realization and better economies of scale, the margin improvement should take place.
The company now is not looking for any more inorganic growth opportunities. The 2 new businesses master batches and carbon black should start contributing in a huge way to sales and profitability going forward and will help the company in higher margins.
While there is not much capex required by the company, it would require some capex to be done for the 2 new businesses in terms of their capacity augmentation which will be less than Rs 100 crore going forward in next 5 years.
On Brexit, the management does not expect any major changes on the business activities and exports to the Parent. The Parent has already shut down some of the global manufacturing capacities and shifted the manufacturing base to India. However there can be some forex impacts due to currency movements, as company exports both in EU and in US currency, with more in EU currency.
The management continued to be optimistic and expects the company to grow net sales by 20% CAGR in next 5 years.
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