FCL - Fineotex Chemical Limited Share Price

Management Outlook and Major Points:

Outlook:
Management is optimistic about sustained growth driven by strategic expansion, strong financial performance, and market opportunities. They emphasize leveraging new facilities, geographic diversification, and sustainability trends to capitalize on domestic and international demand. The focus remains on high-margin specialty chemicals, operational efficiency, and strategic collaborations to enhance shareholder value.

Key Highlights:

1. Capacity Expansion: Acquired a 7-acre fungible plant near Ambernath (Rs.35 crores, funded internally) to boost production for textiles, home care, hygiene, and drilling chemicals. This facility enhances agility and meets rising demand.
2. Financial Performance:
   • Q3 FY24: Revenue Rs.1,385 million (+26% YoY), EBITDA Rs.404 million (+41.3% YoY, margin 29.1%), PAT Rs.329 million (+46.5% YoY).
   • 9M FY24: Revenue Rs.4,160 million, EBITDA Rs.1,101 million (+37.8% YoY), PAT Rs.905 million (+42.5% YoY).
   • Robust ROCE (35.2%) and ROE (30.4%).
3. Fundraising & Dividend: Approved Rs.280 crores via equity/warrants (Rs.346/share) for strategic initiatives, product development, and acquisitions. Interim dividend of 60% (Rs.1.20/share).
4. Market Opportunities:
   • Textiles: Recovery expected with stable cotton prices, global demand revival, and Red Sea disruptions favoring Indian exports.
   • FMCG/Oil & Gas: Growth in sustainable detergent solutions (replacing LABSA) and oilfield chemicals.
5. Sustainability Focus: Early-mover advantage in eco-friendly products (e.g., Bluesign-certified textiles, ZDHC compliance), driving customer retention and premium pricing.
6. Operational Efficiency: New automated plants reduce costs, improve margins, and enable rapid scaling. Fungible capacities allow flexible product shifts.
7. Demand Drivers: Inventory buildup (Red Sea delays), raw material price volatility, and geopolitical shifts benefiting India's chemical exports. Realizations expected to rise from Q3 lows.
8. Geographic & Customer Diversification: Expanding in Bangladesh, Vietnam, and Europe; targeting 50% growth from new customers and 50% from deeper wallet share in existing clients.

Management anticipates stable EBITDA margins (~29%) with volume-led growth, supported by pricing power in specialty segments and operational leverage.

Question 1:
Since we already have like 60% of our products coming from the finished chemicals, right. So how much portion can that further go up to. And are the current margins sustainable?
Answer: Fungible capacities allow flexibility across product lines. Margins improved due to raw material price reductions partially passed to customers and operational efficiencies. Sustainability depends on product mix, market dynamics, and geopolitical factors (e.g., Red Sea disruptions).

Question 2:
We saw significant uptick in the volume. However, the revenue didn't see any major uptick. So, is the realization across the industry down which has led to this drop or is it due to the change in the product mix?
Answer: Volume growth (40% YoY) outpaced revenue growth (26%) due to lower realizations from product mix shifts and raw material price reductions. EBITDA margins expanded due to cost efficiencies and controlled pricing strategies.

Question 3:
When can we expect our average realization to reach like 100 per kg. And what would be the factors which will lead to this?
Answer: Current realization (~Rs.83/kg) is the lowest in 5"“10 years. Red Sea disruptions, freight cost hikes, and raw material inflation may drive future price increases. Focus on high-margin specialty products and customer acceptance of price adjustments will aid realization growth.

Question 4:
Can you give a breakup of your volume mix between the textile and the FMCG business for Q3 and 9 months?
Answer: ~60% of volumes are from FMCG/cleaning/hygiene segments, ~40% from textiles, oil & gas, and others. The mix has remained stable YoY, with FMCG driving consistent growth.

Question 5:
What has been the domestic and export mix in the similar Q3 and 9 months?
Answer: 75% domestic, 25% export. Geopolitical challenges (Red Sea) are prompting export customers to prioritize Indian suppliers, potentially boosting overseas sales.

Question 6:
Why such a large fundraise (Rs.280 crores) despite modest capex (Rs.35 crores)?
Answer: Funds will support organic expansion, strategic acquisitions, and synergistic opportunities in specialty chemicals. Promoters and non-promoter investors participated, reflecting confidence in growth prospects.

Question 7:
How is demand in domestic and export markets? Are customers stocking inventory due to Red Sea issues?
Answer: Domestic demand is improving; export demand is rising due to delayed shipments from European competitors. Inventory stocking is occurring to mitigate supply chain risks. Textile recovery and sustainable solutions in detergents/O&G are key drivers.

Question 8:
When will the new Ambernath plant commence operations? What capacity additions are planned?
Answer: The new 7-acre facility (near existing plant) will cater to future demand. Permissions and approvals are underway; commissioning timelines depend on regulatory processes. Current utilization is ~67%, with gradual capacity additions planned.

Question 9:
Can you guide us on what kind of volumes you've done in absolute numbers this quarter?
Answer: Q3 FY24 volume was ~17,000 tons, up ~40% YoY. Capacity utilization remains healthy, with fungible production supporting multi-segment demand.

Question 10:
Are current realizations (~Rs.82/kg) a base for future growth?
Answer: Yes. Realizations are at a multi-year low and likely to stabilize/improve due to rising input costs, freight disruptions, and a shift toward premium product mixes.

Question 11:
What drives volume growth in textiles and FMCG? Is it new customers or wallet share gains?
Answer: Growth is split equally between new customers (geographic expansion) and wallet share gains (customized solutions, sustainability focus). Over 100 FMCG clients, including regional players, contribute to diversification.

Question 12:
Will EBITDA margins (~29%) sustain or improve?
Answer: Margins benefit from operational efficiencies, premium product mix, and pricing power. Absolute EBITDA will rise with volume/realization growth, though margin percentages may stabilize near current levels.

Question 13:
What volume growth is expected in FY24 and beyond?
Answer: Historical 12-year CAGR of 28% supports continued ~30-40% growth, driven by capacity expansion, new customers, and sustainability trends. Demand recovery in textiles and FMCG innovation are key catalysts.