Neogen Chemicals Ltd (BOM:542665) Q2 2025 Earnings Call Highlights: Strong Revenue Growth ...

GuruFocus News
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Release Date: November 13, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Neogen Chemicals Ltd (BOM:542665) reported a 20% year-on-year revenue growth to INR193 crore, driven by higher volumes in core business segments.

  • EBITDA increased by 33% year-on-year to INR35 crore, with margins improving by 180 basis points to 17.9%.

  • The company successfully commissioned new capacity for lithium electrolyte salts and additives, with initial customer approvals received.

  • Neogen Chemicals Ltd (BOM:542665) is actively engaged in expansion activities, including a Greenfield battery material facility using Muis technology.

  • The company is seeing strong demand for non-Chinese products, particularly in the electrolyte market, aligning with India's expanding EV industry.

Negative Points

  • Inorganic chemical revenues declined by 24% due to lower lithium prices, impacting overall revenue growth.

  • The company faces challenges from geopolitical tensions and inflation, affecting industry pricing power and profitability.

  • There is a delay in the ramp-up of battery chemical revenues, with expectations revised to INR50-75 crore for the current year.

  • Neogen Chemicals Ltd (BOM:542665) is experiencing competitive pressure from Chinese companies, particularly in advanced intermediates and bromine derivatives.

  • The increased capital expenditure in the battery chemical segment is expected to result in higher depreciation and interest costs going forward.

Q & A Highlights

Q: Can you provide details on the CapEx for the battery chemicals segment and expectations for the full year? A: Dr. Haren Kanani, Managing Director: The CapEx for the battery materials is mostly included in the INR150 crore spent in the first half. We have invested around INR350 to 400 crore in total for battery materials. We expect to end the year with a CapEx of around INR700 to 750 crore, with the balance coming next year as Mitsubishi constructs the main plant.

Q: Could you break down the subsidiary revenues for this quarter between Neogen Ionics and Unicap? A: Dr. Haren Kanani, Managing Director: Neogen Ionics is still in single-digit crores, while the balance is from Unicap. There has been significant improvement in Buly Chem, with battery material revenue remaining similar in single digits.

Q: How do you view the risk of changes to the Inflation Reduction Act in the US? A: Dr. Haren Kanani, Managing Director: Customers have indicated that even without the IRA, they need a second source outside China for electrolyte salts. They believe some form of IRA will continue due to significant investments made. Our customers have encouraged us to continue our investments and consider additional molecules.

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