Navin Fluorine International Ltd Q3 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Abhijit Akella - Kotak Securities (Institutional Equities) - Analyst : Good evening, gentlemen. Thank you. A couple of questions, one on specialty chemicals and one set ones of question on CDMO. in Spectrum's First, if you could please help us with an update on some of the key growth projects, we've been implementing. So what exactly is the capacity utilization of the multipurpose plant? And how do we see it ramping up next year? Do we still expect it to hit full utilization and CY24. Also any discussions with the customer for the dedicated plant, which is already running at optimum capacity to double the capacity they are expanding? And finally, the five new molecules that you talked about, one introduced this quarter, maybe there's four more next quarter, what might be the revenue potential from these?

Question: Abhijit Akella - Kotak Securities (Institutional Equities) - Analyst : No, that's helpful. And so just to clarify the multipurpose plant, for which we had a revenue potential of about INR270 crores. That one is running at about 80% in fiscal 2024 itself. And the other one, which was INR160 crore of revenue potential that one is at full utilization for fiscal 2024?

Question: Abhijit Akella - Kotak Securities (Institutional Equities) - Analyst : Okay. Understood.

Question: Abhijit Akella - Kotak Securities (Institutional Equities) - Analyst : So of the total 70%, we are talking about 80% here?

Question: Abhijit Akella - Kotak Securities (Institutional Equities) - Analyst : Any revenue potential from this that you could share?

Question: Abhijit Akella - Kotak Securities (Institutional Equities) - Analyst : And just the other one I had was on CDMO. While we've talked about the CapEx number for this MSA with the European customer, is there a revenue number also, you could point at and the other one was just that of there was this large purchase order of $60 million that we had a year back or so we were expecting some renewal of that order in CY24. Sort of any update on that? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. FEBRUARY 06, 2024 / 12:45PM, NAFL.NS - Q3 2024 Navin Fluorine International Ltd Earnings Call

Question: Abhijit Akella - Kotak Securities (Institutional Equities) - Analyst : And on the purchase order any update on that for upcoming year?

Question: Abhijit Akella - Kotak Securities (Institutional Equities) - Analyst : There was this $16 million PO order we had about a year back and we were expecting a renewal of that order in CY24.

Question: Abhijit Akella - Kotak Securities (Institutional Equities) - Analyst : So 4Q FY24, we'll have an $18 million of delivery.

Question: Abhijit Akella - Kotak Securities (Institutional Equities) - Analyst : Yeah, Q3 and Q4 of last year?

Question: Abhijit Akella - Kotak Securities (Institutional Equities) - Analyst : Yes, that's fiscal 2025, the upcoming year 2024-2025. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. FEBRUARY 06, 2024 / 12:45PM, NAFL.NS - Q3 2024 Navin Fluorine International Ltd Earnings Call

Question: Abhijit Akella - Kotak Securities (Institutional Equities) - Analyst : Okay. So we do have that visibility now clearly defined that that order is coming next year?

Question: Abhijit Akella - Kotak Securities (Institutional Equities) - Analyst : Understood. Thank you so much, and I'll get back in the queue for more.

Question: Rohit Nagraj - Centrum Broking Limited - Analyst : Thanks for the opportunity. My first question is on the HFO project. So just wanted some understanding. When we started the project, which is a period of three to six months, we went up to the optimal utilization. And now in the last three quarters, we've been struggling to, again get back to, the optimal level, or the ramp-up is low. So is there any deferred demand issue or is there any structural issue at plant level? And how do we foresee in terms of the revenue potential, which earlier we are envisaging about INR400 crores to INR500 crores annually. Whether we are on target for that in FY25 or that is also deferred?

Question: Abhijit Akella - Kotak Securities (Institutional Equities) - Analyst : Sure. That's helpful. Second question is again, similar on CDMO. So we've been guiding that on a normalized basis, we will have about $40 million of yearly run rate, barring any lumpiness on a quarterly basis. So how are we expecting the run rate during FY24 and in FY25, as you mentioned, that there will be this additional orders and maybe $16 million to $18 million, would that be over and about this normalized run rate of $40 million.

Question: Abhijit Akella - Kotak Securities (Institutional Equities) - Analyst : Thanks for answering all the questions, and best of luck.

Question: Sanjesh Jain - ICICI Securities Limited - Analyst : Thanks for taking my questions. I got few of them. First on the R32, we thought that R32 capacity addition was freezed in December 2023. Can you just help us understand the regulation now that we are going to expand, does this qualified for the quota determination period because this capacity is coming after December 2023? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. FEBRUARY 06, 2024 / 12:45PM, NAFL.NS - Q3 2024 Navin Fluorine International Ltd Earnings Call

Question: Sanjesh Jain - ICICI Securities Limited - Analyst : So let's take one by one.

Question: Sanjesh Jain - ICICI Securities Limited - Analyst : So this capacity will not qualify for subsidy payout, but the scope is whatever we sell from this plant well-qualified to get the baseline capacity for the next?

Question: Sanjesh Jain - ICICI Securities Limited - Analyst : That's fairly clear. Got the regulation clear now. The second is on the gross profit margin. Sequentially, it is down by 500-basis point in the stand-alone entity, close to 430-basis point, while the mix in the CDMO business has improved and -- can you help us understand what is driving down the margins in this quarter despite having a higher CDMO contribution?

Question: Sanjesh Jain - ICICI Securities Limited - Analyst : Yes, standalone as well as consol also. Console also, we had a equaling decline in the gross profit margin, which is -- ?

Question: Sanjesh Jain - ICICI Securities Limited - Analyst : Just one follow-up on this. I think fluorspar prices have actually gone up. That means inventory excess inventory should have positively benefited us on the gross profit, right?

Question: Sanjesh Jain - ICICI Securities Limited - Analyst : Again, sorry, I'm sticking to a few bookkeeping questions to get the modeling, right. Until other expenses has also gone up sharply quarter-on-quarter, any particular reasons for that or it is largely to do with the HFO plant getting corrected in the Dahej, and that's been booked here?

Question: Sanjesh Jain - ICICI Securities Limited - Analyst : No, meaning in looking at this quarterly number it's better to look at.

Question: Sanjesh Jain - ICICI Securities Limited - Analyst : Fair enough. And I got two few smaller questions. One, on the peak revenue from HFO, I thought last time when we met, we said that the peak revenue because of the currency as well as higher raw material prices now stands this INR5.5 billion, but in you previous mentioned question for peak revenue being at INR4.6 billion, what has changed in the last two, three quarters? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. FEBRUARY 06, 2024 / 12:45PM, NAFL.NS - Q3 2024 Navin Fluorine International Ltd Earnings Call

Question: Sanjesh Jain - ICICI Securities Limited - Analyst : So, we will be doing a INR4,460 crores in FY25?

Question: Sanjesh Jain - ICICI Securities Limited - Analyst : That's what we are looking at today. My last one is on the dedicated facility, I think dedicated facility, we ramped up completely and now we are talking of an 80% utilization, it's more of a timing issue that 80% or --?

Question: Sanjesh Jain - ICICI Securities Limited - Analyst : That's fine. I think I got confused between the two plants.

Question: Sanjesh Jain - ICICI Securities Limited - Analyst : So one last question on the CDMO. Previously, we said that we will be able to achieve that $100 million revenue from existing cGMP1, cGMP2, cGMP3, and cGMP4 will help us expand from there -- ?

Question: Sanjesh Jain - ICICI Securities Limited - Analyst : You got the question. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. FEBRUARY 06, 2024 / 12:45PM, NAFL.NS - Q3 2024 Navin Fluorine International Ltd Earnings Call

Question: Sanjesh Jain - ICICI Securities Limited - Analyst : And we still hold that by FY27, we should be hitting that $100 million kind of -- ?

Question: Sanjesh Jain - ICICI Securities Limited - Analyst : No, no, that's right. That's very difficult to predict. But I got the point.

Question: Sanjesh Jain - ICICI Securities Limited - Analyst : Got it. That's all from my side. Thanks Anish and Vishad for answering all the questions.

Question: Siddharth Gadekar - Equirus Securities Private Limited - Analyst : First on the specialty chemical business with capacity utilization that you have alluded to in this quarter for the entire year? If we do that calculation, it seems our base business specialty, which was there still FY22 would have declined by between 45% to 50%. What has led to that significant decline and how should we look at that business going out, ahead? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. FEBRUARY 06, 2024 / 12:45PM, NAFL.NS - Q3 2024 Navin Fluorine International Ltd Earnings Call

Question: Siddharth Gadekar - Equirus Securities Private Limited - Analyst : Yes.

Question: Siddharth Gadekar - Equirus Securities Private Limited - Analyst : And secondly, on the HFO side, we have always spoken about other de-bottlenecking, which are expected to come in CY23. And then we were also talking about a possibility of a Phase 2, where do we stand on that project?

Question: Siddharth Gadekar - Equirus Securities Private Limited - Analyst : So just one last thing on R32 capacity going into CY28, is it fair that we will be operating at capacity at around 66%, 67% capacity utilization. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. FEBRUARY 06, 2024 / 12:45PM, NAFL.NS - Q3 2024 Navin Fluorine International Ltd Earnings Call

Question: Siddharth Gadekar - Equirus Securities Private Limited - Analyst : Yes.

Question: Siddharth Gadekar - Equirus Securities Private Limited - Analyst : But given that you have to produce an average of 2024 to 2026. So our average will be lower than what we produced in 2025, 2026. So technically from 2028, our production will be around -- ?

Question: Vivek Rajamani - Morgan Stanley & Co LLC - Analyst : So first question on your specialty chemicals and the CDMO segment. In 2Q, you mentioned you'd had seen certain deferrals, which you were expecting in this quarter. I just wanted to clarify if these are the same molecules which are continuing to see some sort of deferment or postponement even in this quarter. And if you could just spend a minute to kind of explain what exactly is the issues that the customers are facing, with respect to some of these monitors?

Question: Vivek Rajamani - Morgan Stanley & Co LLC - Analyst : So, do you mean Q4?

Question: Vivek Rajamani - Morgan Stanley & Co LLC - Analyst : Sure, sir. And the second question I had was and I can understand this is a bit of a difficult question to answer, but just with respect to both your specialty chemicals and CDMO, would it be possible to give a sense of, you know, how much you think your portfolio is immune to these risks or deferrals or how much part of your portfolio do you think is actually immune to such risks? And how much is actually very reliant on you know, the customers are you changing your views on demand, but would it be possible to give some sense there?

Question: Vivek Rajamani - Morgan Stanley & Co LLC - Analyst : Thank you so much for the explanation.

Question: Chetan Thacker - ASK Investment Managers Private Limited - Analyst : Good evening. Just two clarifications, largely. One is on the HFO plant. Just want to clarify. So this year we will be undershooting the optimum number that is there on revenue and that to get back to that optimal number in FY25? Is the correct understanding? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. FEBRUARY 06, 2024 / 12:45PM, NAFL.NS - Q3 2024 Navin Fluorine International Ltd Earnings Call

Question: Chetan Thacker - ASK Investment Managers Private Limited - Analyst : But the demand itself, you mentioned is subdued. So that would mean that the number itself is lower than the optimum number?

Question: Chetan Thacker - ASK Investment Managers Private Limited - Analyst : Just on the spec chem bit, so the base business is expected to come back in FY25 and the additional three molecules that will get added that will also start to contribute in 2025. That should be a fair understanding overall of what we're seeing in today's numbers?

Question: Chetan Thacker - ASK Investment Managers Private Limited - Analyst : Understand. Just not talking about an asset level, but at an overall revenue level, the number that we are seeing today for FY24. For FY25, there will be a bump up, which happens as the base business again recovers, which you mentioned right now, campaigns come back any one molecule -- ?

Question: Chetan Thacker - ASK Investment Managers Private Limited - Analyst : Understood. And on the CDMO side, again, FY25 will start getting more towards normalization. And we remain we would adhere to the medium-term target of $100 million once this cGMP4 comes in? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. FEBRUARY 06, 2024 / 12:45PM, NAFL.NS - Q3 2024 Navin Fluorine International Ltd Earnings Call

Question: Archit Joshi - Batlivala & Karani Securities India Pvt. Ltd. - Analyst : I just had a few fact checks, especially in CDMO and so you've had a few announcements in the past. So there was there's been a contract that we signed with Fermion then there was a discussion about the $16 million PO with an American company. And Now speaking of expansion of the MSA with one European customer and commercial opportunity that we have received from an American customer, is there any overlap?

Question: Archit Joshi - Batlivala & Karani Securities India Pvt. Ltd. - Analyst : Got it. And with the same American partner that we are speaking of, we have intended to commission around INR160 crores in Phase 1, which I think Vishad ji mentioned earlier is towards this particular contract. The total [CapEx] number being INR288 crores, I was just wondering if there are two dedicated blocks separate to service different customers? Or how should we read this?

Question: Archit Joshi - Batlivala & Karani Securities India Pvt. Ltd. - Analyst : Right sir. And that helps a lot. Thank you.

Question: Madhav Marda - Fidelity Investments - Analyst : My question was on the R22 capacity. I just wanted to understand, given we are, actually first question here is, why didn't you announce this 45,000 tons earlier and then take you can make use of quota CY24 as well because this base period has been known. So I'm just wondering why announce it now and not earlier than sort of let go of flexible 14, 15 months of production for the quota?

Question: Madhav Marda - Fidelity Investments - Analyst : Understood. When you said pricing should be like pricing, should be like R22 basically you're saying that once the quota, et cetera, is frozen after CY26 as demand kind of grows, because India should and the world should see good pickup for R32, as you mentioned, across various blends, et cetera. So you're saying that's why demand support should be quite tight for this product longer term, is that how we should see it --?

Question: Rohan Gupta - Nuvama Wealth Management Limited - Analyst : Good evening and thanks for the opportunity. Sir, just first is on taking from the previous question itself. So R3, you had mentioned that the current capacity had been fully utilized. While we understand that the industry scenario still remains weak and there has been significant capacity additions has happened. Just wanted to understand what is driving this demand, whether it's domestic exports from where it will be primarily coming from the export market or what is the driver?

Question: Rohan Gupta - Nuvama Wealth Management Limited - Analyst : So my question was around the current demand environment of 32, which you have mentioned that the plant is fully utilized?

Question: Rohan Gupta - Nuvama Wealth Management Limited - Analyst : No, sir, I'm talking about R32 only. And just wanted to understand what is the driving factor for R32, which has led to full utilization at our plant? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. FEBRUARY 06, 2024 / 12:45PM, NAFL.NS - Q3 2024 Navin Fluorine International Ltd Earnings Call

Question: Rohan Gupta - Nuvama Wealth Management Limited - Analyst : And second question is on the -- ?

Question: Rohan Gupta - Nuvama Wealth Management Limited - Analyst : The second question is on the CDMO US, the big new contract, which we have done with. So just wanted to understand that about a little bit more about this new customer, the kind of chemistry, which we will be doing here and the kind of investment we may need to put for this CDMO, cGMP facility. If I clarify, INR288 crore investment, which has been approved by the Board. It does not include this the US-based new customer coming in. Right?

Question: Dheeresh Pathak - WhiteOak Capital Asset Management Limited - Analyst : So Anish when you are explaining the project's revenue potential, the key project that we have undertaken in the last few years. I just wanted a clarification on that. So [our kit] (inaudible) is where we are seeing INR400 crore revenue potential, right? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. FEBRUARY 06, 2024 / 12:45PM, NAFL.NS - Q3 2024 Navin Fluorine International Ltd Earnings Call

Question: Dheeresh Pathak - WhiteOak Capital Asset Management Limited - Analyst : Understood. And this we expect to do in FY25 -- ?

Question: Dheeresh Pathak - WhiteOak Capital Asset Management Limited - Analyst : MPP, which was supposed to be INR280 crore as per my understanding on an annualized basis, we are seeing we are turning 80% of that in current year and we'll do full in FY25, right?

Question: Dheeresh Pathak - WhiteOak Capital Asset Management Limited - Analyst : 80% in FY24, we'll do.

Question: Dheeresh Pathak - WhiteOak Capital Asset Management Limited - Analyst : Yeah. Understood. I understand, not holding your point estimate, just the corridor impact.

Question: Dheeresh Pathak - WhiteOak Capital Asset Management Limited - Analyst : I totally understand that it's not a point estimate. There will be a corridor around it. Understand that. [Fasiya], which is agro intermediate, that was supposed to be INR60 crores that we are already done full revenue this year. Right? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. FEBRUARY 06, 2024 / 12:45PM, NAFL.NS - Q3 2024 Navin Fluorine International Ltd Earnings Call

Question: Dheeresh Pathak - WhiteOak Capital Asset Management Limited - Analyst : what about [Nectar] next year?

Question: Dheeresh Pathak - WhiteOak Capital Asset Management Limited - Analyst : FY26 is when you expect to hit INR600 crore?

Question: Ranjit Cirumalla - IIFL Securities Limited - Analyst : My question is largely on the thought process. Earlier we were only kind of sticking into R22, now over the years we have seen kind of a diversified to HFO and now we are also getting aggressive in R32. How do you see the refrigerant space you already probably five years down the line, is there a plan to further diversify into more refrigerant? Given that we have an HFO capacity coming in the Dahej in three years' time frame?

Question: Ranjit Cirumalla - IIFL Securities Limited - Analyst : So will that also pay way for our entry into plants in the future?

Question: Ranjit Cirumalla - IIFL Securities Limited - Analyst : Right. Understood. Any plans on utilization HF capacity that is likely to come up in couple of years at Dahej?

Question: Sanjesh Jain - ICICI Securities Limited - Analyst : Hopefully we should hear in next year, next fiscal or something, some announcement -- ?

Question: Sanjesh Jain - ICICI Securities Limited - Analyst : So the question was because even under cGMP4, we have given kind of a three year time period to kind of Phase 1 and Phase 2. So whenever we do make an announcement even on that new emerging opportunities, one should take a similar timeframe. So that was the impact -- ? .

Question: Ranjit Cirumalla - IIFL Securities Limited - Analyst : And finally, on the gross debt level, can you share the figures? -- The gross debt figure for the December ending quarter?