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Analyst Meet / AGM - Analyst Meet

With the increase in contribution of functional master batches, particularly from FY'18 onwards, the company can see margin improvement

Poddar Pigments

26-Aug-2016, 12:25
In interaction with Mr. S Poddar MD.

Key Highlights

Around 70% of total sales come from generalized master batches while 30% come from special functional based master batches.

The aim of the company is to increase the sale from special functional master batches particularly in exports market. There is a strong demand of functional based Master batches from EU and US. But due to the uncertainty and economic slowdown, some contracts received by the company, could not get materialized. However, management is confident that the sales will start to these new customers by the end of FY'17.

Exports are around Rs 100 crore as on Mar'16. Going forward, exports will grow at least by around 10-12% going forward for next 2 years.

Domestic sales account for around Rs 225 crore of sales as on Mar'16. These sales are dividend equally, further into segments such as Polyester, Plastics and Engineering. Polyester or the MMF fibres is growing around 3-5%, plastics is growing around 15% and while Engineering side, it depends upon the industrial production, it still ends up somewhere around 10%.

Polyester Resins and Pigments are the major raw materials of the company. It imports 50% of its raw materials from countries like Thailand. Some of the pigments are imported from EU for making specialized functional Master batches which in turn are exported to US and EU markets.

Tax rate will remain around 25-27% due to the benefits of R&D expenditure which the company gets. Further, the company is a recognised export house, and gets some export benefits as well every year.

The company's capacity stands at around 13500 MT of mater batches. Gradually, every year the company adds machine lines and increases the capacity by around 10% every year. It has sufficient land and building shed ready wherein it adds machining line. The company can add machine lines upto 18000 MT in same land and building and subsequently, will think of further capacity addition on a green field basis.

The company invests around Rs 4-5 crore every year in liquid fund as a corpus which will be used as and when any green field capacity addition is required. The company is a long term debt free company and will continue to remain the same going forward.

The company's operating margins hover around 7-7.5%. With the increase in contribution of functional master batches going forward, particularly from FY'18 onwards, the company can see around 100 bps of margin improvement.

Overall, it aims for net sales of around Rs 360-365 crore in FY'17 and around Rs 420 crore in FY'18.