Hikal Ltd. Q4FY18 Concall update
Compiled by Dhruv Nawab
- Pharmaceutical division contributes 60% of the revenue and the balance 40% is contributed by crop protection division.
Crop Protection
- Company partner with crop protection companies for custom synthesis and custom manufacturing of intermediates and active ingredients.
- Have their own product portfolio for specialty chemical and biocide industry.
- Contract manufacturing contributes 70% to total revenue of crop protection division and balance from their own product portfolio. Majority of their business is export oriented.
- 10-11 products in contract manufacturing and 5-6 own products.
- In specialty chemical business company offers biocides, anti microbial additives. These products are used in industries like leather, paints, paper, water treatment, personal care, and textile.
Pharmaceutical
- Leading custom manufacturer of APIs partnering with global pharmaceutical company for contract manufacturing and development.
- 50% of the business comes by contract manufacturing and 50% is generic by nature.
- 5-6 products in contract manufacturing and 8-9 products in generic portfolio.
- Majority of pharmaceutical business is export oriented with 55% of sales coming from US, 30% from Europe and remaining from rest of the world.
- Plans to file 4-5 DMFs every year.
- Business is gaining traction in new geographies like Russia, Latin America.
- In pharma business 40% of the customers are repeat client.
- Company long term credit rating upgraded from BBB+ to A- and short term credit rating from A2 to A2+. Expecting another upgrade in credit rating this year.
- Company is expected to grow at 15-20% for next 2-3 years.
- Likely to maintain current margin profile for both the division.
- Company revenue grew 25% in this quarter y-o-y.
- Crop protection business grew 28% and pharma division grew by 21% in this quarter y-o-y
- Revenue for the year ended 31st march 2018 increased 26%
- Cash PAT growth for the year ended 31st march 2018 increased 16% from 140crores to 163 crores.
- Working capital days improved from 160 days last year to 150 days in current year.
- Crop protection downturn completed in 2016-17 and now demand has started to increase. Crop protection cycle is usually of 6-7 years.
- Major growth in crop protection business came from increasing demand of existing molecules and also from introduction of new products done for their innovator client.
- Problems faced by Chinese chemical industry have shifted large business to India which will be beneficial for the company. 15-20% growth expected in Crop protection business driven by launch of new molecules.
- In custom manufacturing business all the price increase in raw materials are passed on to customers.
- Company received 2 environmental clearances for expansion of their plant.
- 250 crores CAPEX plan in next 2 years.
- EBITDA growth would be in line with sales growth.
- Company will continue to spend 3-4% of the revenue on R&D.
- In crop protection company is developing more on-patent products.
- Biocide business to grow significantly because of troubles faced by Chinese companies. Barriers to entry are high in biocide business.
- It takes 3-4 years for DMF filing to commercialise.
- New products add approximately 5% to the revenue.
- D/E ratio will be maintained under 1 during expansion.
- Company will reduce its dependency on China for its raw materials by being backward integrated.
- Margins of pharmaceutical business are likely to improve because of the new products being higher margin product.
- Both the divisions have 70% capacity utilisation.
- Competitors in crop protection – PI Industries, in pharma – Divi’s, dishman.
- In pharma opportunity is more on generic side.
ITD Cementation Q4FY18 Concall update :
Compiled by Manish Mall
- Part of mumbai underground metro completed 2 km before time
- in pune and nagpur project too ahead of time
- 1900 cr for marine projects in completion
- nuclear power project first time project
- for road 3 HAM jobs, on own --- each one in excess of 1000 cr
- China harbour tie-up for bridge over ganga
- L1 in Andaman 300 cr
- port of Singapore looking fwd too -- will keep looking for international projects
- patna & Bangalore airport in pipeline
- hydel tunnel in north east
- school building in kolkatta
- marine projects margins better than elevated metro
- mumbai metro project no investment by company totally funded by client
- Bangalore elevated metro is a big project - going bit slow than planned
- 126 - 329 cr debtors gone up -- delhi metro -- claim will clear that in time to come
- project is completed , billing is left ; so debtors will be cleared
- last year total 3500cr of projects are in final stages
- udhan gudi order received now after 3 yrs -- work to be started in May itself
- 1800 cr of project has been cancelled --
- will be participating in many projects all over india many projects coming up ( repeated many times , good amount of work orders by govt mainly )
- itd cem india jv -- bangalore metro and kolkatta projects
- interest cost have gone down in the projects -- net debts 155 cr
- royalty payment of 0.5 % is very helpful -- we get many projects against royalty payment
- bidding for 10000 cr of orders in pipeline in next few months
- mumbai ahmedabad bullet train project is a huge project -- looking fwd to it
- 7 packages 15k cr each -- japanese or indian JV
- station / elevated / underground -- will be looking for Elevated on own, no JV
- qip used to paid off debt -- mutual fund investment
- receivable days 45 days ; working capital is comfortable
- cochin shipyard marine lost marginally by 2% against L&T, we have good competitive adv
- Mumbai coastal road project will be bidding for it -- no JV reqd
- capex 60-70 cr -- for renewal of assets -- last qtr was 30 cr
- tunnel boring machine is with JV partner
Welspun Enterprises Q4FY18 Concall Update :-
Compiled by Manish Mall
- Order flow of 7000 cr in pipeline
- 2000 cr order recd now lately for tamil nadu HAM projects
- 5500 - 6000 cr EPC business order book
- delhi meerut 14 months ahead of completion -- annuity bonus expected-- 34 cr expected
- 50% bonus to be shared with subcontract
- yumuna nagar order project to start soon -- will be completed ahead of schedule
- CGARG project execution in full swing
- over water bridge project financial closure done Q1fy 19 should start
- currently 4 large projects going stong 2 projects started giving revenue other 2 to give revenue in next month
- devas water project execution begun -- epc business not HAM
- stood L1 for tamilnadu HAM project 55 km , should get award letter soon
- oil n gas Jv Adani welspun - Mumbai / gujarat / kutch 2 blocks
- rigs are enroute to start soon -- Mumbai block recd from Ongc D9 is own project
- revenue to start in q3-q4 of FY 19-20
- Palej block is on hold from Govt side , should start in next 5-6 months
- NHAI 45 bids about 45000 cr in pipeline -- to bid for 2/3rd of projects
- expecting 5000 cr order in future other than orders recd
- Good visibility for next 2 years -
- To double up revenues in 2 years purely by Infra projects to be 4000 cr
- NET DEBT IS NEGATIVE -- CASH SURPLUS - FIXED ASSETS ARE Healthy
- invested 369 cr equity in HAM projects
- will like to maintain 600 cr of cash surplus for next few qtrs no equity dilution
- by Q2 will bid for water projects -- 1000 cr expected orders
- Receivables are 2 kinds -- service concession receivable ( short term ) --
- trade receivable are the debtors or work in progress
- ebidta margin is 10.9% --- on a stable basis should be 12% other than other income
- asset light and depreciation will always be low
- Capex 200 -250 fresh equity will be reqd for HAM projects over next 2 yrs
- if win more projects this may go up in future by Fy 2020
- EPC order backlog of 6000 cr which to be completed in next 2-3 years
- vision: - to complete projects ahead of schedules with quality completion
- started 3 projects in this qtr - invested 300 cr in this projects on HAM projects
- will not be monetizing mumbai blocks -- D9 is close by so completing the projects with ONGC projects -- additional well drilling to be done -- revenue by 2021-22 around 5 billion over time
- not related to welspun steel business
- cash on books to be deployed to business projects later on
- NHAI started rating Developers , which is good for Us as built good goodwill
- EPC business has easy entry business so will stay asset light : - will like to complete projects with the partnership of subcontractor and not complete self going ahead.