Ladies and gentlemen, good day and welcome to Ami Organics Q1 FY23 earnings conference call hosted by Haitong Securities India. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Amey Chalke, Pharma Analyst at Haitong Securities India. Thank you, and over to you, sir.
Thank you. Good afternoon, everyone. I welcome all to Ami Organics 1Q FY23 earnings call. We are joined today by senior management members, including Mr. Naresh Patel, Chairman and Managing Director, Mr. Bhavin Shah, CFO. I would now like to request Mr. Naresh and Bhavin sir to share their comments on 1Q FY23 result view. Thank you, and over to you, sir.
Okay.
Yeah?
Mr. Bhavin Shah?
Yeah. Thank you, Amey. Good evening, everyone. We are pleased to welcome you all to our earnings call Q1 FY23. Please note that a copy of our disclosure is available on the investor section of our website, as well as on stock exchanges. Please do note that anything said on this call, which reflects our outlook towards the future or which could be construed as forward-looking statements, must be reviewed in conjunction with the risk that the company faces. With that, I would like to hand over the floor to our Chairman and MD, Mr. Naresh Patel, for his opening statement. Over to you, sir.
Thank you, Bhavin. Good evening, everyone. I am Naresh Patel, Chairman and Managing Director of Ami Organics. Welcome you all to our Q1 FY23 earnings call conference call. I hope you all are doing well. The current global business environment remains uncertain and challenging, driven by geopolitical conflicts and the Ukraine War, which is affecting energy prices, commodity prices, and input prices across the world. Specifically for the pharma industry, this has led to higher raw material costs with a limited ability to transfer incremental costs to the customers. In fact, we have witnessed a pricing war in the U.S. and other markets as companies scramble to maintain their market share. For intermediate players, we are at the lower end of the value chain. We have been able to pass on the cost to customers albeit with delay.
Coming to Ami Organics, we have entered the financial year on a positive note amidst all the global challenges. Our revenues for the quarter grew steadily at 16% on a year-on-year basis to INR 131 crore. I would like to highlight here that if you look at our past records, you will notice that our Q1 is always lower than Q2, and Q2 is always lower than Q3, and Q3 is always lower than Q4. So usually, our Q4 is always the highest revenue-generating quarter, and Q1 is always the lowest revenue-generating quarter. Therefore, I would request you all not to review our results on a sequential basis, as you will always see a drop in revenue from Q4 to Q1.
Coming to margins, we have been able to increase our gross margins driven by a better product mix, cost optimization measures, process improvement measures, the use of new technology, and most importantly, our ability to pass on the incremental cost to our customers. But EBITDA margins remain steadily at Q4 levels due to higher energy prices, which continue to be at elevated levels due to global issues. To conclude on the financial performance for the quarter, I believe we have been able to improve our margins and deliver strong growth in the first quarter of the year. Coming to the business updates, on a segmental basis, Advanced Pharmaceutical Intermediates business grew by 15% on a year-on-year basis, whereas the Specialty Chemicals business grew by 26% on a year-on-year basis.
I will discuss the advanced pharmaceutical business growth driven in detail as it still continues to be our major business contributor, around 78% to the top line. We have been able to register strong growth in such a challenging environment for the pharmaceutical industry because of several reasons. They are as follows: one, preferred supplier. As informed earlier, we are usually the preferred supplier for our, sorry, sorry, for our customers. So we continue to get orders as per plan from our customers as they continue to let the market for their respective products. Usually, second and third suppliers get most affected in the environment of muted demand. Our innovative business continues to be strong as some of the products are either in the patent or innovative continues to lead the market in off-patent products. And third and most, product portfolio.
Ami has more than 480+ products in the basket, with more than 90% of them going into the chronic formulations. As informed earlier, around 30-35 products contribute around 80% of the pharma intermediate business, and most of our top products continue to see strong demand with a few exceptions. This shows the sustainability of our product portfolio. I would also like to highlight that we have firm orders in hand for the coming two quarters from the export business, and the domestic business continues to see good traction. So overall business remains strong for the advanced intermediate segment. Coming to specialty chemicals business, we had good quarter with revenue growth of 26% on a year-on-year basis. The specialty business uses more of the commodity chemicals, which continues to put pressure on the margins, but we have been able to keep our margins steady at Q4 FY22 levels.
I believe we will start seeing strong growth from this part of the business in the current financial year. We have a couple of focus areas for this business, which will drive the overall business for the year. Let me discuss each of them with you. Number one is new products. We are planning to launch two new products under our import substitute model in agrochemical space. Our products are already in the sampling phase with the various customers, and I believe we will see commercialization in the second half of the financial year. Number two is new technology. As we say, we are shifting a few major products of the specialty chemicals business to newer technologies such as continuous flow reactions, which will help us ramp up our volumes as well as improve the margin.
Also, increasing volume sales once we improve the yield for the products using newer technology. We will be able to compete with the bigger players on the volume and price, which will help us increase volume sales. Operational efficiency. We continue to focus on operational efficiency as well as process improvement. We have a separate team that works on this. So it is a continuous process that I believe will help us improve our margin. Overall, I remain excited about the specialty chemical business as we have a strong plan in our hand, and I'm sure we will execute it well. Moving on the update on electrolyte additives, currently our product is with the various customers in China and Europe. Some of these are in a very advanced stage of qualification, and I expect to see some revenue from this product in Q4 of this financial year.
We are also engaging with various customers in Korea as well as India for this product. We have already acquired a land parcel in Sachin, Surat, for the future expansion of the electrolyte business. As of now, our capacities in Jhagadia unit are enough to cater the initial demand for this product. If we see good projections from our customers, we will go for the dedicated plant for the electrolyte. Overall, we are witnessing robust demand for our products. With firm orders in hand, I am very much optimistic about delivering sustainable growth of 25% for the financial year 2023. Please note, we have not included expected revenue from the electrolyte in this growth estimate. Now I am going to request our CFO, Mr. Bhavin Shah, to discuss the financials. Over to you, Bhavin.
Thank you, Mr. Naresh Bhai. Good evening, everyone. I would like to briefly touch upon the key performance highlights with the quarter ended 30th June 2022, and then we will open the floor for the question and answer. I will start with the quarterly updates. Revenue for the quarter was at INR 131 crore, up 15.8% as compared to INR 113 crore in Q1 FY22. The gross profit for the quarter was at INR 63.9 crore, up 31% as compared to INR 48.7 crore in Q1 FY22. The gross margin for the quarter was at 48.8%, an increase of 572 basis points on YOY basis and 467 basis points on a sequential basis.
As Naresh Bhai mentioned in his opening remarks, a better product mix, cost optimization measures, process improvement measures, the use of new technology, and the ability to pass on the incremental cost to the customer have helped us in improving our margins during the quarter. EBITDA for the quarter was INR 23.7 crore, up 7.1% as compared to INR 22.1 crore in Q1 FY2022. EBITDA margins for the quarter were at 18.1% as compared to 19.5% in Q1 FY22 and 18% in Q4 FY22. We have been able to maintain our EBITDA margin on a sequential basis, which is suppressed due to higher energy cost, freight cost, as well as lower EBITDA margins of the specialty chemical business. PAT for the quarter was at INR 14.9 crore, up 8.3% on YOY basis. The PAT margins for the quarter were at 11.3% as compared to 12.1% in Q1 FY23.
When you compare the PAT margins with Q4 FY22 numbers, kindly bear in mind that we had tax benefit in Q4 FY22, which led to a lower tax of 4% for the quarter. This expanded the PAT margin for Q4 FY22. If you remove the tax impact from Q4 numbers, PAT margins are steady on a sequential basis. Export for the quarter was at 57%, whereas domestic business was at 43%. We have maintained our EBITDA margin in the specialty chemical business at Q4 levels, even as raw material prices for the products remain elevated. As Naresh Bhai mentioned, we remain optimistic for the year and believe that we will continue to grow at a historical growth rate of 25%. I will now conclude my remarks and request the moderator to open the floor for question and answer session.
Thank you. Ladies and gentlemen, we will now begin with the question and answer session. Anyone wishing to ask a question may please press star one on your touch-tone telephone. If you wish to remove yourself from the question queue, you may press star two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Sudarshan Padmanabhan from JM Financial. Please go ahead.
Thank you for taking my question. Can you hear me, sir?
Yeah.
So my question is to understand a bit more on the other cost and raw material cost as you mentioned. If I look at probably the transportation cost or whatever cost it is, it peaked out, say, in the early part of FY20, first quarter, and then the costs have come down. And similarly, the crude prices have also come down. So if you can give some color in the trajectory of the other cost and the raw material, whether from the first quarter, are we seeing the cost coming down on an absolute basis? And the second is I would also like to understand you talked about the benefits of the specialty chemicals kicking in in the second half. But also, we have an operating leverage. I mean, if you can break your other cost, you also have fixed and variable costs.
Given that the first quarter is the weakest in terms of the absolute sales, as we move to the second, third, and fourth quarter, shouldn't the other costs get rationalized? If you can give some color, where do you see the margin trajectory moving from the current 17.5%-18% to the fourth quarter?
Thank you very much, Sudarshan Ji. I will give some brief answer after that. More detailed numbers kind of will be given to you by Bhavin. See, basically, as we say that our business is a seasonal kind of every quarter. So the quarter one is very lower compared to quarter four. So every quarter, we have an incremental revenue growth that will be directly impacting on the variable cost. Fixed costs will be minimal for quarter four against quarter one. So this is directly adding in the margin of the margin of the company. So in that sense, the incremental from 2017 to 2020, 2021, 2022 will be possible because this is directly adding benefit into the fixed cost lowering in that. In terms of energy and other costs, and I think Bhavin can give you the more idea on that.
So Sudarshan, as mentioned by Naresh Bhai, our gross margin will be over around the existing margin, 1% or 2% up or down due to product mix. See, as we move forward, our other costs will be improved as energy cost, freight cost, and other costs will normalize over the period. And as we go along, our sales and volume will improve. So we will see that will help us and benefit us that our margin will improve further from that.
Also, we are changing the source of energy from furnace oil to the coal. So by this way, we can reduce a sizable amount of energy cost in our Jhagadia plant.
Sir, last year, the full year, if I look at it, I mean, leaving the seasonality aside, we had about 20.
Sorry, Sudarshan, can you speak a little bit loud because I'm not able to hear you?
Yes, sir. So last year, when I look at the full year EBITDA margin, so we were sitting at around 20%. I mean, and we are talking about a lot of benefits in terms of cost cutting as well as the absolute intensity of the fuel cost, etc., coming down. So should we at least see about 100-200 basis points improvement if I'm looking at it for a full year basis, FY22 versus FY23? I mean, should that be something that we should look at?
Yes, you are rightly saying that. If you see, this quarter also, our margin is improved. Gross margin is improved by 4%. Because of this energy cost and import freight cost has impacted a little bit badly on the margin, that's why we are at a muted level against Q4. But yes, definitely, upcoming three quarters is really helping us. We are also working on that as well as some cost measures what we have taken. We'll give you the results in these Q2, Q3, and Q4. Definitely, what you say is rightly that our margin will be improved by one or two basis points.
Basis points in the portfolio?
Portfolios.
One final question before I log out. I think one very interesting thing is the electrolyte. It's still not a part of the numbers, but the application of electrolyte seems to be quite exciting. I mean, once it starts coming in, you also have some land. If you can give some color, I mean, not necessarily quantitatively, but qualitatively, say, in three years, would this be a substantial portion of the business? How was the profitability of the electrolyte business versus your current business? Some color on this side.
I can guide you like this. See, basically, we have developed electrolyte additives, which is mainly used as an SEI, which is very important for making the electrolyte solutions. This is very important for lithium-ion batteries where you make the cells with lithium-ion and carbon as an anode. And there is an electrolyte is used as a filler between that. So till now, the two products we have developed is vinylene carbonate and fluoroethylene carbonate. These are the two products which we have developed. We were not discussing the name till now because it was not matured, and we want to avoid any further competition in the market. And now, samples are approved in China. And also, we are circulating samples in Europe. We have several customers, international customers. They are from automobile. They are from battery storage manufacturers and also solar industries.
It's a huge potential of this product. We started circulating samples. This is a little bit longer process of qualification because it's not only qualifying the chemical, but also it is a safety aspect according to this. They are trying to test also safety aspects. That's why it is a little bit one or two quarters will be delayed on that. We are very optimistic that because we are one of the first companies outside China and because of the geopolitical situation, all the European and Japanese, Korean companies want to have a source outside China. That is a great advantage for Ami Organics as promoting this product into the market. This product is a huge potential because green energy sector is growing very fast. Everybody knows about that. The potentiality of this molecule is very huge in that.
According to the reports what we had from the professionals, it is 2028. They are expecting $2 billion of the revenue of this molecule. And we are expecting if 10% also we catch around that, that will be a huge amount. So this is what we are expecting in this molecule. And that is the reason why proactively we are ready with the land so that we can finish our Environment Clearance and all kind of things so that as soon as the demand arises in a quicker mode, we can do the expansion in 2024, 2025, something like that.
Sure, sir. Thanks a lot, as well.
Thank you.
Thank you. The next question is on the line of Abhishek Singh from Arihant Capital . Please go ahead.
Good afternoon, sir.
Good afternoon.
My first question. CapEx plan for FY23 and FY24, if we do INR 1 CapEx, how much top line we get? And second question, how much we may grow in the next 3-5-year time span if any picture of company you may present? Thank you, sir. Okay. The CapEx, for INR 1, we could easily generate 3-3.5 of the revenue on that CapEx. Whereas as we are always conservative in our projections and also on the last 10-11 years of revenue profile, we are growing at 25% each year. And this is the same we are claiming on that. So you can easily understand based on this guideline at what level we can reach in 2024, 2025. Okay. And, sir, last one, which type margin are you expecting?
Margin is we want to go to our normalized margin in FY 2021 where it's our target because pharma is our good margin portfolio. Whereas for specialty chemicals, because it's a new one and also we are from single digit, we bring it to the double digit. And now, right now, we are with a very adverse market situation of the raw material, even though we are maintaining at a double digit, 11% in this quarter as well. And we want to grow this specialty segment every quarter 1%-2% basis. That will help us to go near to the pharma margin. And our target, we eventually go to 22%-23%, which is our target for this margin level. Okay. Thank you so much, sir.
Thank you. A reminder to the participants, anyone wishing to ask a question may please press star and one. The next question is on the line of Jayesh Shah from Capital PMS. Please go ahead.
Hello? Can you hear me?
Yes, yes, yes, Jayesh.
Congratulations, sir, for a good set of numbers, even despite you being the weakest quarter, posting a great set of numbers. Sir, I had a couple of questions. One, on the pharma side, can you throw some light on what kind of therapies are calling for more of our raw material if you can throw some light on the end customer profile? And secondly, as you mentioned the name of the two electrolytes, I just wanted to know till what stage are we backward integrated when it comes to the manufacturing of these two electrolytes? Because one being fluorine-based, so are we procuring fluorine locally or what is the situation on that front?
If I understand your first question that you want to know which are the therapeutic areas which is going as a growth, is correct?
Yes, that's right, sir.
Okay. So mainly, we are working on a 17 therapeutic area. But if you see the top 5 products, we are mainly coming from antidepressant, anticoagulant, anti-Parkinson, and antiretroviral. So these are antidiabetic. These are the four segments where we are growing very strong in this segment. Mainly, our business is very well distributed between regulated and generic as well as export and domestic. So in that sense, we are very well balancing our demand of our product into the world. I'm coming to your second question related to the backward integration of our electrolyte. Basically, we are not dependent on China for any raw material in both the electrolytes. Yes, one raw material is imported, but that is imported from Europe. It is importing in hundreds of tons every month, not only by us but all the commodity or all the other big industries.
So it is not an issue of having that raw material availability. Related to fluorine, our chemistry is not using any fluorine or HF for fluorine gas, but we are using potassium fluoride, which is readily available in India. We have good relations with the potassium fluoride supplier. That will not be any issues for us to have that material availability. In terms of positioning of the product, as we say that the product is already developed and the vinylene carbonate is now under final stage of somewhere it is under final stage of approval, some stages in the initial approval. Whereas fluoroethylene carbonate is now going into the market for sampling.
Okay. Sir, do we have any kind of process patent for these two electrolytes? Have you applied for it?
Yet, we have not planned it because we want to return our positioning, but it is under write-up right now.
Okay. Okay. Thank you so much, sir. All the best.
Thank you, sir.
Thank you. The next question is on the line of Kumar Saumya from Ambit Capital. Please go ahead.
Hi, sir. Good afternoon. I just have two questions. Firstly, on the one-off experience that you have highlighted in the presentation regarding the demolition of civil structure at Sachin, Surat, if you could quantify what was the impact of this demolition in numbers, what was the additional cost that came through?
Let me get later. If I understand your question, is that what will be the impact of civil construction destroying the financial? Is that right?
Yes, sir. So it is INR 74.6 lakhs. So you can say INR 75 lakhs.
Okay. Sir, what was the export share in the revenue for this quarter as compared to last year?
57% is our export revenue.
Last year's same quarter, how much was it?
Last full year, it was 58%.
Okay. Thank you, sir. That will be all.
Thank you. A reminder to the participants, anyone wishing to ask a question may please press star and one. The next question is on the line of Karthika Iyer, an individual investor. Please go ahead.
Hi. Am I audible?
Yeah.
Congratulations, sir, on a good set of numbers. I'm sorry, I couldn't catch the names of the electrolyte molecules that you mentioned. Could you please repeat the chain?
The number one, which is in a very advanced stage, is vinylene carbonate. The second one, which is going to be in the market, is fluoroethylene carbonate.
Okay. And my other question was related to the integration of Gujarat Organics. Have we done everything we need to to fully, seamlessly integrate Gujarat Organics facility, or is there still a way to go in that exercise?
See, the integration of Gujarat Organics, it was in three phases. First is to centralize and consolidate the production from two locations to one location, which we had finished in Q4. Now, we are doing a process improvement phase where we do operational efficiency as well as improvement in the yield if there is a technological deficiency that we need to mitigate. Also, in that case, there are two products, which one of the largest products is methyl salicylate that we had converted from batch to continuous. And the equipment is already ordered. Now, we are in phase of installation of that. So once it will be installed, then our capacity for making methyl salicylate will be very huge. And that will be giving us a cost leverage for holding our position in the market.
So we are in the second phase where we are now improving the technology for each molecule of Gujarat Organics, where either it is a flow reaction or it will be a change in the process to make the better yield or avoiding major generation of the environmental effluent. And also, these are all activities going on right now. That will be finished by Q2. And then we will be focusing on the third phase in terms of dominating in the market by putting in a large-scale production.
What is the percentage of raw materials that are imported right now for us?
Percentage of import is 36%.
Sorry, just adding Bhavin's statement is that for pharmaceutical existing business, it is 28%. Because Gujarat Organics is now a part of Ami Organics, so that has added another 8% import in that. Now, after this adding of Gujarat Organics, the cumulative import is 36%. Whereas for pharma, it still remained at 28%.
All right. That's all from my side. Thank you. All the best, sir.
Thank you, sir.
Thank you. The next question is on the line of Hardik Shah from Taurus Mutual Fund. Please go ahead.
Hi, sir. Thank you for taking my question. Sir, in your opening commentary, you have mentioned that we are planning to launch two agrochemical products under the import substitute basket. So if you could throw some more light on what these products could be for us in the future in terms of, say, our revenue contribution from these and the market size, etc., sir?
Thank you, Hardik Bhai. See, right from IPO and then our last three commentary also, we say that 2 is commercialized and another 3 is in the pipeline. So out of these 3 and then 2 more, we had added in this. And so out of these 3, 2 is now moved to the pilot. And in that 2, moved to the pilot. And then out of that, 1 is in agro applications. And that is mainly used by big agro manufacturers in India like UPL, Coromandel, Deccan, GSP, these kind of companies. They are completely importing these intermediates. So that intermediate, we had made it. And this intermediate is under sample approval stage. It is a 2-cyanophenol is the name of the molecule. So that molecule is having a huge potential. The final API is still under patent by Syngenta.
Once it will go out of patent, it will be a huge volume demand.
Understood, sir. Sir, so we are planning to launch multiple products in the import substitute basket. Sir, where do you see the import substitute basket landing after a period of, say, three or four years in terms of overall mix?
In overall mix, after 3, 4 years see, import substitutes is mainly in a specialty chemical segment we are focusing because there, we can get the large volume and large value as well. So in that segment only, we want and we can dominate that by technology and better chemistry, better yield. And these are the things which make us competitive against our competitor based outside India. So we are looking for that should be every year, it has to contribute 5%-10%. So we are targeting by after 3, 4 years, it should be sizable amount, somewhere around 20%-25% of total revenue should be coming from these segments.
Perfect, sir. Thank you so much, sir.
Hello?
Yeah, that is all from my side, ma'am.
Thank you. The next question is on the line of Gagan Thareja from ASK Investment Managers. Please go ahead.
Yeah. Good afternoon, sir. So the first question is on the other expenses for the quarter. If I compare it to 1Q of FY22, other expenses and even employee costs are up pretty sharply. Even sequentially, they are up. So can you break down the other expenses increase? How much is due to higher utility cost? How much due to higher freight cost? And how much is because of the Gujarat Organics OPEX coming on?
So yes, Gagan, on the first part, you have asked for personal cost or manpower cost. So during the quarter, we have rolled out annual increments. So in manpower cost, that is the effect which is coming in this quarter on a sequential basis as well as on YOY basis. Now, on the other part of other expense, so we have higher freight cost for import of material. So freight cost is high by 2-2.5%. Our conversion cost and electricity cost is also high by around 5%-6%. So these are the two major factors due to which our other expenses are on a higher side on a sequential basis. On a YOY basis, it is not comparable because during Q1 FY 2021, our unit two and unit three were not fully operational. And integration process was there.
So year-over-year, other expense number is not comparable. On quarter-over-quarter basis, if you see other expense, so it is high by 10%. So conversion and manufacturing cost, power, electricity, and freight, these are the three main items which has a higher impact. And there is some amount on the part of consumable also.
All right. But do you feel that the other expenses reported in 1Q are sustainable, or is there further sort of possibility of it going up? I understand as sales move up, they might in absolute terms move up. But in percentage terms, would other expenses as a percentage of sales remain stable going ahead, or will they drop, or will they remain stable?
Percentage of sales will be incremental for next three quarters. So that will be the first answer to you. And this operating cost is also we are working very high on that. And it will go down and going to be normalized in Q3 or Q4. Basically, because Gujarat Organics, unit two was using gas, another unit was using FO. Both are not a good fuel. And the impact of that is very high. So we already got the environment clearance for replacing furnace oil to coal. And very soon, we are already in process also installation of the coal boiler there and already procured, and installation is going on. So in this quarter only, we are targeting to commission it. So once it will commission, then sizable decrease in the energy cost in unit three. So that will be giving good advantage to us.
In freight, everybody is having a problem from the logistics point of view. But we are expecting if it will be normalized in the next couple of months, that will be also giving a reduction in that.
Also, can you give us the segmental EBITDA numbers? You have reported segmental sales. I think in the past, you used to report segmental EBITDA also.
Segmental EBITDA. EBITDA for our pharma is 19.62. For specialty, 10.14.
Okay. And what is the current I mean, the utilization levels of Gujarat Organics, is it more or less where it was in the last couple of quarters, or has it improved?
It is the same as 40% in Gujarat Organics.
For the year, do you expect it to rise going ahead? What could be a reasonable number to think of in terms of Gujarat Organics utilization?
It will rise by 10%. But then also, we are putting some continuous operations. So that will be replacing batch process to continuous. So it is very difficult for me to tell that utilization will go very high or will remain in a level because new products are also introducing in that area. But it will go up to 50% in these years.
Okay. And the 15% growth that you have reported on your pharma intermediates, can you sort of split it up into volume growth and price or mix-led growth? Likewise, for Gujarat Organics business also, can you split it up both in volume growth and price growth?
So Gagan, majority of our growth is coming from volume only. Volume growth is more than 90%.
Okay. Volume growth is 90%. And for the agrochemicals that you intend to launch in the second half of this year, can you give us some idea of what is the current market size of those two molecules? And you indicated one is an intermediate for an under-patent molecule of Syngenta. If you could give us some more idea there.
See, currently, it's under patent. So it is not that great of somewhere around INR 20-25 crore currently is the total import size of that intermediate. And it will grow. It's a very big fungicide and very important fungicide for agrochemicals. So it will go maybe 3x, 2x, 3x in upcoming years.
When does the patent expire on this one?
I don't know the final API patent expiration history. But it will be in the next couple of next year, maybe next year or maybe 2025. Exactly, I don't know. But what I got from all the buyers, the demand will arise very huge in 2024. And we need to have a capacity to cater that.
All right. The other molecule, could you discuss something about that? I mean, whatever you're comfortable.
That is from the pharma side. It is an anti-inflammatory non-steroidal anti-inflammatory intermediate, which is purely importing from China. We are now in a pilot stage. Once we got a commercial order for that, I will disclose the name in that as well.
Any potential market size that you can give?
It is our molecule, see, single molecule, we have a lot of molecules. So it will not go beyond INR 40 crores-INR 50 crores if it is completely mature.
Okay. And when do you expect these two give you full potential of sales? By what time?
FY24.
FY24. Right. And on pharma, I mean, the intermediates business, you have reported relatively I mean, the sales momentum has come down relatively, although it's still healthy at 15%. Likewise, your peer is also in the other company, listed company which supplies intermediates has also had a relatively soft quarter in Q1. How should we think of the pharma intermediates business for FY23? Do you think this is just a transitory phenomenon, and things will start recovering going ahead because inventory buildup might start happening by the pharma company?
You are rightly saying that pharma currently is having a pressure of sustainability in terms of the positioning in the market. Luckily, we are not in an acute business. We are mainly in a chronic business where there is a daily demand, dosage is always there. So we are very good having export form orders in hand, whereas domestic also is a spot basis getting good orders. Also, there is a projections. What we received is also giving us a good visibility of whatever we had planned, budget, and everything will be right now within line with that. So I hope that will be remaining the same for our end buyer as well.
Right. So essentially, you're saying that your order book gives you visibility for the guidance of or the aspiration of 20%-25% top-line growth?
Yes.
Right, sir. If the input costs remain at where they are at the current level, as you scale up your sales in the future quarters, you are confident of being able to improve your operating margins as well?
Yep.
Sir, finally, if you could give me the, I'm sorry to repeat this one, but if you could give me the name of, I think one molecule you mentioned for the electrolyte was vinylene carbonate. The other was Fluoroethylene or Fluorovinylene Carbonate?
No, no. It's a fluoroethylene carbonate.
fluoroethylene carbonate, right. Okay, sir. Thank you. I'll get back in the queue.
Thank you.
Thank you. The next question is on the line of Tarun Shetty. Please go ahead. Tarun, your line is in the talk mode. Please go ahead.
Hello.
Hi.
Hello.
Can you hear me?
Yes, sir. Yeah, hi. So just wanted to know the performance of some of your top molecules like trazodone, entacapone. How have they performed in the current quarter, and how do you see them performing in the coming quarters?
Trazodone has contributed around 21%. Entacapone is 7.69%. We see the steady growth in this molecule for the year.
Okay. And in dolutegravir, you had lost substantial traction in the last year. So currently, how do you see this planning out?
See, dolutegravir, this year has contributed 6%. We are expecting it will remain in this range. But the new molecules like apixaban and vildagliptin, darolutamide, will be giving us a good potential in this year as well as in upcoming years.
Okay. And I believe you also launched sitagliptin in the import substitute product. So is the traction substantial in this particular one? You had mentioned to one of the participants.
Yes, we got several tons of orders for that molecule. And now, one customer already started placing order on a regular basis. So we are highly focusing on that intermediate with all the customers making sitagliptin.
Okay, okay. That's good. And in the spectrum space, sir, salicylic acid is supposed to be one of your rather, the intermediates for that would be supposed to be decent growth this year. So how are the intermediates perform?
salicylic acid, we are importing. We have a good, I can say, the salicylic acid is our major raw material, which we are importing in Gujarat Organics products.
Oh, okay, okay. Lastly, on the Ankleshwar and facilities, the timeline for FY2024 is still on. Have you started the hiring process for that facility?
Yes. Timeline is still on track. Already, we started building the civil structure in there. Also, some hiring has already happened. That is also one of the reasons that some employee cost is started putting in that. But not huge number we had hired. But there are project people out there who are already on hold now.
Okay. But majority of the hiring will happen in the year-end of FY24?
Yeah, FY24 when it is coming to the stage of installation and commissioning.
Okay, okay. Yeah, that's it from my side, sir. Thank you.
Thank you. The next question is on the line of Hemang Dadhich from Varanium Capital. Please go ahead.
Sir, thank you for the opportunity, sir. Sir, I wanted to understand what are our top five products that would be contributing to the overall sales number?
It is 47%.
47%. Okay. On the tax rate, for this quarter, we had a tax rate of 26.9%. For the full year, will we be closer to 24%-25%, or should we look at this product? What number should we work with?
Yeah. So our normal tax rate is 25.16%. And for full year, it should be in the same range. This time, we have one-off write-off, which is not allowed in taxation. So it is 1% higher than normal tax rate.
Okay. So on the CapEx front, we have INR 190 crore of CapEx. And at Ankleshwar, the full capacity will come in fourth quarter 2024. Now, along with this, any other CapEx we have during the year in 2023 that would increase our capacities?
During the year, we have a budget of INR 30 crore for other modification and maintenance CapEx.
Okay, okay. As you said, the INR 190 crore of CapEx will give us a revenue of 3x going forward after 2024. Is that understanding right?
Yeah, 3, 3.5. It depends on the product mix.
Okay, okay. Thank you, sir. Yeah.
Thank you. The next question is on the line of Amar Maurya from AlfAccurate Advisors. Please go ahead.
Yeah. So thanks a lot for the opportunity. Sir, first question is, you said that the beta for pharma is INR 19 crore and specialty chemical is INR 10 crore, right? Did I heard right?
No, it is 19.62% and 10.14%.
Oh, okay, okay, okay, okay. Perfect. And secondly, sir, in terms of the ongoing CapExes which are going on, like in Ankleshwar and the expansion of pharma, so those CapExes are on track, and they are likely to come on schedule?
Yes, for the time being, yes. Still today, it is going on as per the bar chart.
Okay. And third, sir, as you stick to your guidance of 25%-20% kind of a top-line growth, so this quarter I mean, obviously, the growth rate was little tapered. So should we expect that the major kickoff should happen in the second half, or it should start from the second quarter?
It is a gradual increment. So Q2 will be more than Q1. Q3 will be more than Q2. And Q4 is the highest one.
Okay, okay, okay. And by the time, a few of your new capacities will also come, right, by the time?
Yeah, yeah.
Okay, okay. When you say that, sir, the margin will gradually improve. This quarter, there was some one-off cost also, right, into your EBITDA. How much was that?
It is INR 75 lakh.
Okay. That's all? Okay.
Yeah.
Okay. And when you see, sir, in terms of the EBITDA margin improvement, should we see the improvement from the second quarter onwards, or it would be, again, the back-ended more in the third and fourth quarter?
It is same revenue growth. Similarly, it will be growing the same space.
Okay. Perfect, sir. Perfect. Thank you, sir. Thank you.
Thank you. The next question is on the line of Rajdeep Singh from ASK Investment Managers. Please go ahead.
Hello? Hi, Nareshbhai. Good evening.
Good evening. Sir, you said dolutegravir contribution is 6% growth, or it's a contribution to the revenue is 6%? It's a revenue 6% contribution, precisely 5.96%. Okay. And sir, on this ARV piece of the business, it is well known that there has been pressure on the end formulation of ARV business. How does it trickle down to you? In formulation, there is pressure. It trickles down to API manufacturers. For you, how has been the volume or price growth in this? And how has the contribution been over the last few quarters?
See, dolutegravir is still under patent, and it's only highly dependent on the tender business. And last year, with tender, was not issued. So that's why dolutegravir was not in that great position. In this year also, there is a very less amount of tender issued.
So that is the reason also that dolutegravir is not in our top three products currently.
Okay. But it is there in top five, okay? Yeah. Okay. So how is the volume and price currently and going forward? How do you see this? And not only. Price is stable, but ARV product as well? We don't do any other ARV. Only we have this dolutegravir. Okay, okay. And sir, outlook for the same, how do you see?
This year, we are looking the same as FY22. And we are expecting that by next Q3 or Q4, these people will get the good demand, and then it will be start. Currently, we are working with only two customers based in Hyderabad who are right now ordering us, and we are supplying them. Okay. And sir, both are Hyderabad-based players? Hyderabad is the antiviral hub.
Okay, okay. And sir, Nareshbhai, from a medium-term perspective, between your two businesses, the pharma intermediates and the specialty chemical, how do you see the growth rate between the two over the medium term? Strategically, how are you positioning yourself? And what percentage of your clients or in what percentage of your business does the clients choose you, and what percentage do you choose your clients?
Very, very good question. In terms of Ami, it is to bring specialty chemicals somewhere around 35% of the total revenue. And we are on track with that. We are working on chemistry and technology and infrastructure to make these because specialty chemicals don't have the high volume value. So it's only high-volume game. And there, we are targeting to reach up to 35% in our next two to three years in terms of contribution in the revenue.
Choosing the there is a customer in pharma, customer mainly ask us because we are very well established name in pharma that we are the first choice for any molecule as we are very strong in documentation, FDA-approved, only chemical manufacturing facility in India. So that is where customer preferred us. And we have more than 1,670 customers in pharma. In specialty segments, it's a new segment for us where we approach to the customer. And also, Gujarat Organics has done a wonderful job having more than 600 customers with them as well. But they are all either small or big. They are big name like Bayer CropScience, and all these kind of company in pharma. Also, Pfizer kind of company is their customers. But we are just trying to increase the volume there as well.
Fair, fair. This is helpful.
And lastly, sir, you mentioned that on the energy side, you will be switching from FO to coal. What kind of savings would this bring into? And you then plan to alternatively switch between the two, or how do you plan to maintain the energy mix? And does any of your plant also operate on gas currently?
Yeah, we have a plant operate on gas in all areas in Jhagadia as well as in Surat as well as in Ankleshwar. See, basically, Ami is very highly focused on environment compliances. And we have a tendency policy not to violate anything. Furnace oil is not a good fuel. And it's already this I can say we remove from the list of the good fuel in environment.
And the day we had takeover, we could not immediately replace it because we need to have to go to the Environment Clearance and all. That we had done it. We got the approval from the MOEF about changing from fuel from FO to coal. But the same boiler cannot. It's the GOL plant you're talking about, sir, right? Yes, yes, yes, GOL. FO, we are using in GOL only. So where we had changes now, and the same boiler can't use the coal and fuel, FO. So we had procure new boiler for coal, which is under installation right now. And once it will be installed, it is a sizable amount saving in energy as well as environmental compliances also very great in that compared to FO. Sir, what would be the savings that you would incur? Sir, this all depends on the coal price and everything.
Once we commission it, then we can disclose that as well.
Okay, okay. This is helpful, Nareshbhai. Thank you and all the best next year. Thank you, sir.
Thank you. Ladies and gentlemen, that is the last question. I now hand the conference over to Mr. Tarun Shetty for his closing comments.
Yeah. On behalf of Haitong, I would like to thank Mr. Naresh Patel and the team of Ami Organics for answering all the questions and giving us the opportunity to host this call. Thank you once again.
Thank you. Ladies and gentlemen, on behalf of Ami Organics and Haitong Securities, that concludes this conference call. We thank you for joining us. Anyway, now disconnect your lines. Thank you.
Thank you very much.
Thank you.