CLEAN - Clean Science and Technology Limited Share Price

Management provided a cautious outlook during the Q2 FY25-26 earnings call, indicating challenges in the market environment primarily due to competitive pressures from Chinese suppliers and demand uncertainties. They noted that standalone revenues decreased by 5% sequentially and by 8% year-on-year, totaling INR 206 crores. The EBITDA margin, although resilient at 44%, reflects a slight decline attributable to a changing product mix. Standalone EBITDA for the quarter was INR 90 crores, with a PAT of INR 65 crores, representing a decline of 15% quarter-on-quarter and 4% year-on-year.

Looking forward, management highlighted several key points:

1. The ongoing impact of tariffs and competitive dynamics in China, which have led to lower sales volumes.
2. For the HALS segment, there was a positive note as monthly run-rate volumes increased by 25% compared to the previous quarter, with improvements in material margins to 35% from 31%.
3. A capex update shared that INR 150 crores were invested in the first half, with significant advancements in commercializing new products, including barbituric acid and a new performance chemical with a targeted capacity of 10,000 tons, anticipated to generate INR 300 crores in revenue by FY28.
4. Management refrained from providing specific EBITDA guidance due to current market uncertainties but emphasized that they are focused on maintaining market share and understanding customer needs amidst these challenges.

The management's emphasis was on navigating through these uncertainties and leveraging new products for future growth, particularly in the HALS and performance chemicals segments.

Major Questions and Answers from the Q&A Section:

1. Question: "First on the established products, what was the volume growth or decline, and what was the realization change versus previous quarter? In YOY is fine, whatever data you've got." Answer: "Sequentially, the revenue declined by 5%, with 2% attributed to volume and 3% to realization. Year-on-year, we saw an 8% decrease, where approximately 6.5% was volume-driven and the rest realization-led."

2. Question: "Now, what are we doing to see that... for the next couple of quarters, how are we planning to save this difficult scenario of uncertainty?" Answer: "We are working closely with customers to understand their needs and implementing price reductions if necessary to keep them competitive. This approach aims to stabilize revenues and prevent market share loss."

3. Question: "How are we trying to address these two geographies - China and the U.S.?" Answer: "In China, our FMCG product has faced reduced demand due to customer backward integration. For the U.S., the decline relates to customer-specific volume changes and tariff uncertainties affecting procurement."

4. Question: "Can you give us the offtake that we are expecting in the second half of this year and next year for our new product?" Answer: "We're currently starting with less than 1,000 tons per annum for our new product. Exact offtake estimates will depend on customer validation and demand, expected clarity will emerge by next quarter."

5. Question: "What kind of capacity are we looking at for the hydroxychloroquine product and how much can it add?" Answer: "The installed capacity for Performance Chemical One is about 10,000 tons, with potential revenue of around INR300 crores at current low prices."

6. Question: "What is the blended realization for HALS products?" Answer: "The HALS business has shown a volume increase of 25% Q-o-Q, although we expected it to be sharper. Acceptance of the product is increasing with competitive quality, and we now aim to enlarge our market share, both domestically and internationally."

7. Question: "What are the next milestones we should look forward to for Performance Chemical One?" Answer: "We aim to have the final product ready by December, with process optimization extending up to March. We're targeting to start sampling to customers soon."

8. Question: "What is the outlook or guidance for EBITDA for this year or the next?" Answer: "Given current market uncertainties and tariff situations, it's tricky to provide specific EBITDA guidance right now. We need to observe market developments for a clearer outlook."

9. Question: "What can we expect in terms of capacity utilization for HALS in upcoming quarters?" Answer: "We do not want to quantify specifically, but we anticipate a good sequential growth, especially in Q4 with increased product demand and potential capacity expansion."

10. Question: "Given the competitive landscape, how do we maintain margins and volumes?" Answer: "Our primary strategy is to maintain volumes to avoid market share loss. Being agile with our strategies to address competitive pressures will be crucial."

This summary captures detailed insights shared during the Q&A session while adhering to character constraints.