FINEORG - Fine Organic Industries Limited Share Price

Management Outlook:
Fine Organic Industries anticipates stable raw material prices (vegetable oils) to continue supporting margins, with no significant volatility expected in the near term. Export challenges due to the Red Sea crisis (increased lead times) persist, but demand recovery is noted in regions like the Americas and Asia, excluding Europe. Capacity utilization is optimal across plants except Patalganga, which has room for ramp-up. The company is focused on expanding production capabilities, including a new Maharashtra SEZ plant (30 acres) for exports (pending land allotment) and commissioning a Thailand facility (trial production by June 2024). Strategic priorities include R&D-driven product development, sustainability, and exploring acquisitions to enhance global reach.

Key Points:

1. Financial Performance: FY24 revenue declined 29.8% YoY (vs. FY23's exceptional year), but Q4 FY24 showed sequential improvement (EBITDA margin: 26.2%). Long-term EBITDA margins guided at 20-22%.
2. Expansion:
   • SEZ Facility: Awaiting land allotment for export-focused manufacturing.
   • Thailand Plant: Trial production of a niche product (third globally) to begin by June 2024.
3. Operational Focus: Patalganga plant to gradually scale up; R&D remains central for developing sustainable additives.
4. Market Dynamics: Export revenue at 52% (FY24); Europe remains weak, but other regions recover.
5. Cash Reserves: ~Rs.900 crore for CAPEX (SEZ, Thailand), acquisitions, and potential international expansion.
6. Challenges: Regulatory delays, global slowdowns, and logistics disruptions (Red Sea).

Question 1: How sustainable are we in seeing this recovery that we saw in Q4? And how much volume growth can we see from here on that is from Q4 volume. So, I understand there has been a strong quarter in terms of both exports and domestic volumes, so how much ramp up on capacity is still possible from here on?
Answer: Raw material prices remain stable, and demand is consistent as of April-May. All plants except Patalganga operate at optimal capacity. Patalganga has room for gradual volume increases. Global demand recovery varies, with Europe lagging, while other regions show improvement. Volume growth is limited without new capacity.

Question 2: On Thailand, if you could just update, how the progress been on the Thailand project? So, last quarter we had mentioned that we are waiting for permissions, there was some FDA approvals that you are waiting for, so if you could just provide an update on that?
Answer: One approval is secured; the second is expected imminently. Commissioning is planned by June 2024. Raw material shipments have begun, with trial production targeted for end-June.

Question 3: Any update on the SEZ land, the final permissions were awaited, the physical allotment of the land, so any progress on that sir?
Answer: SEZ land allotment is verbally confirmed; official letter is pending. Once received, payment and EC approval processes will follow. Construction may begin post-EC clearance, likely within 6 months of allotment.

Question 4: In terms of revenue mix, I am talking about FY24 versus FY23. Is there a significant shift among the segments?
Answer: No major shifts. Export-domestic mix fluctuated due to global slowdown, favoring domestic demand for certain products. Product mix changes were market-driven, not strategic.

Question 5: How sustainable are the improved EBITDA margins?
Answer: Margin improvement stems from stable raw material prices and operational efficiency. Historically, 20"“22% EBITDA margins are sustainable, but external factors (demand, pricing) influence outcomes.

Question 6: On new product development, when can we expect revenue contributions from Indian or Thailand plants?
Answer: Thailand's trial production (single product) begins June 2024; commercialization depends on customer approvals. In India, Patalganga's spare capacity allows gradual monetization of approved products. New products face regulatory delays.

Question 7: At current capacities, what is the peak EBITDA achievable?
Answer: Historical 20"“22% EBITDA margins are benchmarks. Patalganga's ramp-up and stable RM prices could improve margins, but external factors limit predictability.

Question 8: What future product opportunities excite the company?
Answer: Focus remains on oleochemical derivatives. New products and geographies (via SEZ/Thailand plants) are prioritized. Acquisitions complementing existing expertise are under evaluation.

Question 9: What challenges exist in export markets?
Answer: Global slowdown (especially Europe), Red Sea logistics delays, and prolonged regulatory approvals for new products. Domestic challenges include land acquisition delays.

Question 10: Why is cash reserve increasing? How will it be utilized?
Answer: Cash reserves (~Rs.900 Cr) stem from operational cash flows. Allocated for SEZ plant setup, potential acquisitions, and overseas expansion. Fixed deposits yield ~7% annually.

Question 11: How will capacity be optimized until SEZ plant completion?
Answer: No abrupt product-mix changes; commitments to existing customers prioritized. New products will utilize Patalganga's spare capacity gradually.

Question 12: What acquisition strategy does the company follow?
Answer: Targeting profitable firms with complementary products/geographies. Valuations focus on strategic fit, not financials alone. No acquisitions finalized yet.