Concall Notes Q4FY18 – Hikal Ltd, ITD Cementation, Welspun Enterprises

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.

 

 

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