GHCL - GHCL Ltd. Share Price

The management of GHCL provided an outlook reflecting a challenging environment due to global oversupply and price pressures on soda ash. They project demand growth in India for FY '26 to be around 5% to 6%, supported by sectors like solar energy. However, the market is anticipated to remain oversupplied, impacting prices and creating difficulties for the second quarter.

Management noted that despite a 19% drop in soda ash prices over the past two years, GHCL's bottom line was impacted by less than 5%. This performance was attributed to operational efficiencies that contributed to approximately 50% of the stabilization benefits, while raw material price drops accounted for the rest. The management remains optimistic about GHCL's position due to its strong customer service capabilities and cost optimization strategies.

Key forward-looking points include:

1. GHCL's internal efficiency initiatives are expected to remain sustainable, putting the company at an advantage when market conditions normalize.
2. The company is focused on product diversification, with bromine and vacuum salt projects expected to be commissioned in FY '26.
3. Long-term strategic investments like their greenfield projects are poised to enhance operational and financial outcomes significantly.
4. The IRR for the new greenfield soda ash facility is anticipated to be around 17% to 18%.
5. The feasibility of a new capacity addition emphasizes addressing the existing gap in India's soda ash market, which has seen stable growth despite global fluctuations.

Overall, while immediate challenges persist, GHCL's operational efficiencies and proactive strategic focus are believed to position the company favorably for future growth.

Question: What are the key sources of our cost advantage? And how would our cost compare versus peers in India and globally in synthetic soda ash? And how much cheaper is natural soda ash to make?
Answer: Our cost optimization hinges on two factors: effective raw material usage and minimizing wastage. While I can't disclose peers' specifics, our efficiencies are top-tier. Natural soda ash is cheaper to produce directly; however, when considering total costs for imports, synthetic soda ash can be competitive in India.

Question: By when do you expect Phase 1 and 2 of the new soda ash plant to be operational? And how will the cost structures be in this new plant versus our existing plant?
Answer: We anticipate commissioning both Phase 1 and Phase 2 within the next 3 to 4 years. Initial costs will be high due to loan interest, but operational costs will be lower due to advanced technology. Thus, the new plant will be more cost-effective than our current facility.

Question: On the greenfield asset, how much have we spent as of now? And what do we envisage or budget for this financial year?
Answer: We've tentatively spent around INR 160-180 crore on the greenfield asset. For this fiscal year, we expect minimal additional expenditures, perhaps INR 10-20 crore. Significant spending will occur post-2026 when physical activities ramp up.

Question: What was anticipated from the introduction of MIP and how is this MIP extension going to change or affect margins?
Answer: MIP was expected to provide price stability for soda ash, but it hasn't yielded significant benefits. The current soft prices may continue, but we don't foresee drastic drops further. Its effectiveness remains uncertain; we're also pursuing anti-dumping duties for relief.

Question: Regarding the antidumping duty, what is the status?
Answer: Stakeholder meetings happened recently, with authorities reviewing input before making a decision. We'll keep shareholders informed as updates come.

Question: How is the EBITDA margin expected to shape up for H2, with the bromine and industrial salt products?
Answer: Q2 appears challenging due to price drops and seasonality. However, we're ready to capitalize on the new products post-commissioning in FY '25-'26, with significant benefits expected in '26-'27.

Question: With regards to the Chinese soda ash market, what is the outlook given their high inventory?
Answer: Chinese demand has slowed recently, but any recovery could rapidly erase their surplus. While they have significant inventory now, I don't see it posing a long-term threat to other producers, especially as demand rebounds.

Question: Are we seeing any meaningful offtake yet in segments like solar glass?
Answer: Yes, we're optimistic about future growth in soda ash usage driven by sectors like solar glass and lithium. Current consumption aligns with the government's goal to ramp up solar glass capacity by 2030, hinting at increased future demand.

Question: How do you view the soda ash cycle? Are we at the bottom?
Answer: Prices have declined but have stabilized within a margin range. It might take a few more quarters before we see upward movement, particularly as some producers struggle to cover costs, suggesting we may be nearing the cycle's bottom.

Question: What incremental EBITDA can we expect from bromine and vacuum salt businesses?
Answer: I prefer not to quantify this now, as we need to see the plants in operation and stabilized first. Once they begin operating, I'll have more accurate projections for you in upcoming quarters.