Fine Organic Industries Limited — Q4 FY24 earnings call

Call held 13 May 2024

Management summary

Fine Organic reported a sequential recovery in Q4 FY24, driven by stable raw material prices and favorable domestic demand, despite a high base effect from FY23. Management remains cautious about the European market and Red Sea logistics but is optimistic about long-term growth through capacity expansions in Thailand and a new 30-acre SEZ plot in Maharashtra. The company maintains a very strong, debt-free balance sheet with ₹900 crore in cash, earmarked for upcoming CAPEX and potential strategic acquisitions.

Highlights

  • Revenue for Q4 FY24 stood at ₹546 crore, showing a 12% QoQ recovery but an 8.3% YoY decline.

  • EBITDA margin for the quarter was 26.2%, significantly higher than the long-term sustainable guidance of 20-22%.

  • PAT for Q4 FY24 reached ₹114.6 crore, growing 21.6% QoQ, though down 23.3% YoY.

  • Full-year FY24 revenue declined 29.8% to ₹2,123 crore, as FY23 was considered an 'aberration' due to supply disruptions.

  • Cash and fixed deposits on the books increased to approximately ₹900 crore as of March 31, 2024.

  • Thailand project commissioning is expected by the end of June 2024 for trial production.

  • Exports contributed approximately 52% of total revenue in FY24, with Europe remaining the most affected market.

  • Patalganga facility is still in the ramp-up phase, expected to take another 2-4 years to reach full capacity utilization.

Concerns

  • Global Slowdown (Europe)

Key financials

2 periods

Headline

  • Revenue
    ₹546 Cr
    YoY -8.3% QoQ +12%
  • EBITDA Margin
    26.2%
  • PAT
    ₹114.6 Cr
    YoY -23.3% QoQ +21.6%
  • ROCE
    24.7%
  • Cash and Fixed Deposits
    ₹900 Cr
    YoY +113%

FY24

  • Revenue
    ₹2,123 Cr
    YoY -29.8%

What they filed

Q1 FY27: revenue up 19.5%, net profit up 46.2% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue595 522 576 559 572 −4%529 +1%616 +7%668 +19%
EBITDA143 104 108 107 108 −24%85 −18%111 +3%173 +62%
Net profit113 89 89 93 95 −16%68 −24%90 +1%136 +46%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Geographic Mix
    52% Export Revenue Share

Guidance & targets

Capacity

  • Thailand Project Commissioning Capacity · Q1 FY25 · High confidence End of June 2024
    we have started doing all that and we expect to do the commissioning by end of June 24.

    — Mukesh Shah, Chairman

Margin

  • Sustainable EBITDA Margin Margin · Long Term · High confidence 20%-22%
    we know that 20%-22% has always been our sustainable EBITDA margin, which we have always achieved.

    — Sonali Bhadani, CFO

Volume

  • Patalganga Facility Full Utilization Volume · FY28 · Medium confidence 4 years
    So, it will take another 2, 3, 4 years. I don't know exactly, but not so soon... Maybe 4.

    — Mukesh Shah, Chairman

Capex

  • SEZ Plant Construction Timeline Capex · FY26-FY27 · Medium confidence 20-23 months
    it will take about say 4-5 months for EC and another say 16 to 18 months for construction.

    — Nitesh Dhoot (Analyst) / Mukesh Shah

Risks & concerns

  • Global Slowdown (Europe)

    high

    Europe is the worst affected region and demand is not expected to return quickly.

    Management acknowledged

  • Red Sea Crisis

    medium

    Lead times for exports to Europe and US have increased by 1 to 1.5 months.

    Management acknowledged

  • Regulatory Approval Delays

    medium

    Long approval times for new products from global customers and regulatory bodies (FDA, FSSA) delay commercialization.

    Management acknowledged

Areas of evasion (2)

  • Specific volume growth numbers (stated policy not to disclose)
  • Specific details on acquisition targets

Q&A highlights

2 direct
Sustainability of Q4 Recovery Direct
As of now, I don't see much difference than the last quarter, the raw material prices are quite stable and demands are also almost more or less similar like last quarter.

Confirms that the sequential improvement is not a one-off and that the current demand environment is stable.

Asked by Nitesh Dhoot, Dolat Capital

Utilization of ₹900 Crore Cash Reserve Direct
We have kept this cash because we are waiting for this plot to be allotted... Second, we are also considering some acquisition opportunities right now... Third, we are also considering putting up a plant outside India.

Explains the conservative cash management and signals aggressive future expansion plans including international plants and M&A.

Asked by Devendra Chawla, Prasun Exponentials

Thailand Project Scale and New Products Partial
this small capacity we are standing is trial production. Only once we are successful with the trial production will we decide how much additional production we will go for.

Management is being cautious about the Thailand project, treating it as a trial for a new product with only two other global competitors.

Asked by Ankur Periwal, Axis Capital

2 min read 5 chapters

Detailed narrative

Q4 Recovery Amidst High Base Normalization

Fine Organic saw a 12% sequential revenue growth in Q4 FY24 to ₹546 crore, signaling a recovery from previous quarters. Management emphasized that FY23 was an 'aberration' due to extreme supply-side disruptions and price volatility, making YoY comparisons (down 8.3%) less meaningful. EBITDA margins remained robust at 26.2%, though management reiterated a long-term sustainable target of 20-22% as market conditions normalize.

Strategic Capacity Expansion: Thailand and SEZ

The Thailand project is nearing a critical milestone with trial production expected to commence by the end of June 2024. This facility will produce a niche product currently made by only two other global players. Additionally, the company has been allotted 30 acres in a Maharashtra SEZ, which will primarily serve export markets. Construction is expected to take roughly two years once environmental clearances are obtained.

Patalganga Ramp-up and Product Monetization

The Patalganga facility, which started in March 2022, is the only plant currently with significant spare capacity. Management expects it will take another 2 to 4 years to reach full utilization as they gradually monetize new food-grade products. Other plants are currently running at optimal capacity, limiting immediate volume growth until new facilities come online.

Robust Balance Sheet and M&A Outlook

The company has aggressively repaid debt, reaching a near-zero borrowing level, while cash reserves have swelled to ₹900 crore. This 'war chest' is intended for the upcoming SEZ CAPEX, potential international plant setups, and strategic acquisitions. Management is actively evaluating opportunities that complement their existing oleochemistry expertise and product range, focusing on infrastructure and product fit rather than just financial metrics.

Navigating Global Headwinds and Logistics

While domestic demand remains strong, the global slowdown—particularly in Europe—continues to weigh on performance. The Red Sea crisis has further complicated exports, adding 1 to 1.5 months to lead times. Despite these challenges, management noted that raw material prices for vegetable oils have stabilized, providing a more predictable operating environment for the coming months.

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