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    Himadri Special

    HSCLStrong
    Chemicals·1 Jun 2018
    Management Summary

    Himadri Speciality Chemical delivered a breakout performance in FY18, characterized by a 199% surge in PAT and significant deleveraging. Management is pivoting the company from commodity coal tar products toward high-margin specialty segments, specifically Advanced Carbon Materials for lithium-ion batteries and Speciality Carbon Black. With a ₹600 crore self-funded expansion plan, the company aims to become a top 5 global player in speciality carbon black within five years.

    Highlights

    8

    • Revenue grew 49% YoY to ₹1,971 crores, driven by volume growth and better realizations.

    • EBITDA increased 82% YoY to ₹450 crores; PAT tripled to ₹243 crores (up 199%).

    • Net Debt reduced to ₹629 crores from ₹717 crores; Net Debt-to-EBITDA improved to 1.4x.

    • Coal Tar Distillation capacity to expand from 400,000 MT to 500,000 MT by Q3 FY19.

    • Announced ₹600 crore Capex for Advanced Carbon Material (20,000 MT) and Speciality Carbon Black (60,000 MT).

    • Advanced Carbon Material (ACM) facility currently operating at 100% capacity (50 MT/month).

    • Net Working Capital improved significantly to 31% of sales from 36% in FY17.

    • Board recommended a dividend of 10% (Re. 0.10 per equity share).

    What Changed1

    vs Q1 FY26

    Guidance items6 → 7 (+1)

    Key financials

    Single quarter

    06 metrics
    1. 01Revenue₹1,971 Cr+49%YoY
    2. 02EBITDA₹450 Cr+82%YoY
    3. 03PAT₹243 Cr+2.0%YoY
    4. 04Net Debt₹629 Cr-12%YoY
    5. 05Blended Realization₹51,900

    Segment breakdown

    Volume MixCapacity Utilization
    Coal Tar Pitch (CTP)72%100%
    Carbon Black28%86%
    Heatmap· 2 shared metrics

    Guidance & targets

    7
    CategoryTargetPriority
    Capacity
    Advanced Carbon Material Capacity
    5,000 MT
    		High
    Capacity
    Advanced Carbon Material Capacity
    20,000 MT
    		High
    Capacity
    Speciality Carbon Black Capacity
    60,000 MT
    		High
    Capacity
    Coal Tar Distillation Capacity
    500,000 MT
    		High
    Capex
    Total Capital Expenditure
    ₹600 crores
    		High
    Margin
    Speciality Carbon Black EBITDA per tonne
    ₹30,000 - ₹200,000
    		Medium
    Volume
    Overall Volume Growth
    6-7%
    		Medium

    Risks & concerns

    5
    RiskSeverity

    Raw Material Price Volatility

    Management stated they use a transfer pricing/formula-based mechanism with customers, passing through raw material price changes monthly. — Analyst downplayed

    low

    Capex Funding and Equity Dilution

    Management committed to funding the ₹600 crore capex entirely through internal accruals with no equity dilution. — Management acknowledged

    low

    Cyclicality of Commodity Carbon Black

    Management explicitly stated they will not expand in commodity black due to its cyclical nature and lower profitability. — Management acknowledged

    medium

    Areas of Evasion(2)

    • Specific pricing for Advanced Carbon Materials
    • Product-wise realization for naphthalene and coal tar pitch

    Q&A highlights

    3

    “One thing we can clearly say the run rate what we have achieved in Q4, is clearly sustainable. And the intention of the company is to build upon that in the future.”

    Investors were concerned if the sharp margin expansion in Q4 (₹12,900/tonne) was a peak or a new baseline.

    asked by Baidik Sarkar

    2 min read5 chapters

    Detailed Narrative

    01

    Strategic Pivot to Specialty Chemicals

    Himadri is undergoing a fundamental transformation from a coal tar distiller to a specialty chemical powerhouse. The company is focusing on two high-margin pillars: Advanced Carbon Materials (ACM) for lithium-ion batteries and Speciality Carbon Black. ACM is currently operating at a full capacity of 50 MT per month, with plans to scale to 20,000 MT by FY20. Management expects these segments to place Himadri in a 'different league' globally, catering to sunrise industries like electric vehicles.

    02

    Robust Financial Performance and Deleveraging

    FY18 saw a massive 199% growth in PAT to ₹243 crores and an 82% increase in EBITDA to ₹450 crores. This was driven by higher capacity utilization (100%+ in coal tar distillation) and an improved product mix. Simultaneously, the company strengthened its balance sheet, reducing net debt by ₹88 crores to ₹629 crores. The net debt-to-EBITDA ratio now stands at a healthy 1.4x, down from significantly higher levels in previous years.

    03

    Aggressive Capacity Expansion Roadmap

    The company announced a ₹600 crore capex plan over the next two years. Key projects include increasing coal tar distillation capacity to 500,000 MTPA by Q3 FY19 and setting up 60,000 MTPA of speciality carbon black by March 2019. For ACM, the company targets 5,000 MTPA by Q4 FY19 and 20,000 MTPA by FY20. Management emphasized that these projects will be funded via internal accruals (₹316 crores generated in FY18) without equity dilution.

    04

    Operational Efficiency and Working Capital Management

    Management has successfully optimized the cash conversion cycle, bringing net working capital down to 31% of sales in FY18 from 36% in FY17 and 55% in FY14. This improvement is attributed to better supply chain management and operational excellence. The company's credit rating was also upgraded from CARE A to CARE A+, reflecting the strengthened financial profile.

    05

    Market Dynamics and Competitive Moat

    Himadri benefits from a unique integrated business model where a single raw material (coal tar) is used to create multiple value-added products. The imposition of anti-dumping duties on SNF imports from China is expected to boost domestic volumes and pricing. In the speciality carbon black segment, management aims to be among the top 5 global producers within five years, leveraging 7-8 years of R&D to produce high-entry-barrier grades that command EBITDA of up to ₹200,000 per tonne.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.