Thread by @TYMFinance

Bodal Chemical conducted their concall for Q2 FY 22

Here are the conference call highlights 👇🧵

Business Updates:

Bodal's Market Share
Domestic:
- 13% for dyestuff
- 20% for dye intermediates business

Global Market:
- 3% for dyestuff
- 6% for dye intermediates.

• In the event of supply chain tightness, mgmt prefer to keep inventory

Mix:
- Export: 34%
- Domestic: 66%.

Industry Updates:

• Manufacturing in China have been forced to close, temporarily due to lack of electricity (Jiangsu & Zhejiang are the hardest hit)
• Around 20% to 25% of China’s chemical output is expected to be impacted.
• Cost of freight & logistic have been rising.

Business Product:

Price:
- Vinyl sulphone: Rs. 400 per kg
- H acid: 600 per kg

• Utilization of caustic soda as per current plant
status at around 90%.
• Currently at normal prices turnover is ~200cr. Right now prices are 2x & next year turnover is expected to be 325cr.

Dyestuff:

• End-application industries like textile, leather, paper, has been doing well.
• Leading textile cos are having healthy order book.

Dye Intermediate:

• Bodal produce 25 dye intermediate products & over 40% of these intermediates is captively consumed
resulting in significant cost advantage for dyestuff.
• Prices of H acid and vinyl sulphone have moved northwards, which will be reflected in Q3.

Basic chemicals:

• 48% of basic chemicals capacity is captively consumed for dye intermediates.
• Thionyl chloride witnessed good performance during Q2 and mgmt expect the momentum to continue for H2.

Chlor alkali:

• Acquired Rajpura unit from Mawana Sugars in Q1.
• Co. produces caustic soda, bleaching powder,
hydrochloric acid, sodium hypochlorite, chlorine, sulphuric acid.
• Industry witnessed strong tailwinds for caustic soda (key product). Prices remain: 28,000 tonne

• Serving the northern belt of India where most of the FMCG, textile, & paper manufacturers are located.
• At full capacity, Rajpura expected to generate revenues of ~300cr & EBITDA of 20% - 22%.
• In US 2 plants were permanently shut down which has created production gap.

Benzene & sulphuric acid:

• Capacity of sulphuric acid & derivatives: 3,40,000 TPA (which will include 6-7 derivatives)
• Mgmt expect to generate revenues of ~550cr at optimum levels & EBITDA margin 15% -18%.
• TCCD can contribute about 200 crores.

Revenue(H1):

• Dyestuff: 317cr
• Dye intermediate: 314cr
• Basic chemicals: 92cr
• Chlor alkali: 102cr
• TCCA: 22cr

Production (H1): (In MT)

- Dyestuff: 9,518
- Dye intermediates: 12,137
- Basic chemicals: 1,17,234
- Chlor alkali: 37,803 (Caustic soda: 27,711)
- TCCA: 919

Raw Material:

• Costing have gone up by almost 100% due to coal cost.
• Caustic soda and chlorine are the main RM.
• Chlorine is regional product, so it is sold within region. But caustic soda can be send to Gujarat plants & can create integration model.

Subsidiary:

• Sen-er Boya sales dispatches have improved.
• Bodal China has also performed well & turned profitable.
• In a medium term view, these subsidiaries will penetrate in their regions & will bring meaningful business.

Trion chemical:

• Bodal acquired 70% stake in this plant, to set up a vinyl sulphone plant, as H acid is not profitable.
• Effluent of RM of H-Acid & Vinyl Sulphone can be used interchangeably
• H acid has potential of ~100cr & addition of vinyl sulphone can add another 100cr

CAPEX:

• Caustic soda: CAPEX for upgradation of 100-125 cr. It will increase capacity to 99,000 TPA from current capacity of 82,500TPA.
• Saykha greenfield project is in progress &
plan to have operational by Q3 FY23.
• Considering to acquire this 30% stake of TCCD.

CAPEX Spend:

• Considering ~670 crores of cash outflow from both units.
• Out of that, co. has already spent 150cr for acquisition & ~50cr for internal accrual. For 200cr, co. have taken ~116cr of term loan from bank.
•Another ~420cr will be there in FY22 & in FY23.

New Product:

• Expanding product basket in benzene & chlor alkali derivatives (applications in pharma, agrochem, paper, & other)
• Under benzene downstream products, 8-9 products will be manufactured (mention in image)

Competition:

• In dye & dye intermediates, no aggressive plan from any leading cos.
• In chlor alkali, 3 plants are coming in Gujarat (JV between NALCO & GACL, expansion by Meghmani & DCM).
• In sulphuric acid, there are no other plants.
• Top 3 players are getting weaker.

Borrowing:

• Current debt: ~330 crores.
• Borrowing of 150cr is borrowed in dollar. Int rate about 1-1.25%
• Balance of working capital is at ~4.5%.
• Term loan is ~6.75%.
• Blended level, rate is 3-4% as interest cost.
• There is another 135 cr of bill discounting.

Power:

• Co. has entered into contracts for power
- Per unit power is ~Rs. 6.3
- Gujarat: ~7.25 per unit
- Punjab: 6.3 per unit.
- Thermal power plants ~5.5. Rs

• Co. need 30 MGW of power. For solar plant, investment of 200-300cr will be required which not make sense.

For more discussion on Equity research and OI analysis

Subscribe to our YouTube channel 😃

Link 🖇: youtube.com/c/TheTycoonMin…