Jubilant Ingrevia Ltd Q2 FY2024 Concall Summary

Key Takeaways

• Sequential recovery despite headwinds: EBITDA and margins improved QoQ, driven by a favorable Specialty Chemicals mix, even as agrochemical destocking and Chinese dumping continued to pressure volumes and pricing.
• Specialty mix shift is the margin engine: Specialty Chemicals contributed 55% of EBITDA this quarter, with new Diketene, GMP, and CDMO products offsetting declines in the traditional agrochemical-linked Pyridine portfolio.
• Vertellus closure creates a structural opportunity: Jubilant is now the world’s largest and only non-Chinese producer of Pyridine and Beta Picoline, triggering a wave of new customer inquiries for supply chain diversification.
• Capex cycle is on track, but ramp-up faces market delays: New plants are at 50–75% utilization, with full potential revenue of INR1,000 crore-plus expected as markets recover, though management concedes a one-to-two-quarter delay is possible.
• What to watch next quarter: The pace of agrochemical recovery into Q4, the conversion of Vertellus-related inquiries into contracts, and any quantifiable impact from the newly launched Project Lean cost initiative.

Specialty Chemicals: The Margin Mix Shift

• New products offset agro weakness: While traditional Pyridine and Picoline volumes into agrochemicals declined, new Diketene derivatives, GMP facility output, and CDMO projects gained traction, improving the overall product mix and lifting segment EBITDA sequentially.
• Diketene momentum: The plant operated at optimum capacity utilization, with two more derivative products set for commissioning in coming months, though management cautions the revenue impact on the overall specialty segment will only become visible over one to two years.
• CDMO doubling down: The CDMO business doubled revenue in the last 12 months, adding multiple early-phase projects across pharma, biotech, agrochemicals, and even semiconductors, with management targeting similar growth rates for the next three to five years.
• Pyrithiones strength: Healthy traction from paints and coatings customers, with the company claiming to be the lowest-cost producer globally after optimization work; capacity has already been expanded at Ambernath and may need further expansion.
• Agrochemical drag persists: The sector remains muted with recovery expected only in H1 FY25, though management sees some green shoots in Q4 FY24; the new agro actives/intermediate plant remains on track for Q4 FY24 commissioning.

Deepak Jain: "our CDMO business doubled up in last 12 months. And we hope to maintain similar kind of growth rates over the next three to five years."

The Vertellus Opportunity

• A structural shift in Pyridine supply: With competitor Vertellus shutting its US plant, Jubilant Ingrevia has become the world’s largest producer of Pyridine and Beta Picoline and the only non-Chinese supplier at scale, a position management believes is durable given customers’ desire to diversify away from China.
• Inquiry pipeline building: The company has received significant new customer inquiries in the weeks since the closure announcement and is in discussions with several agrochemical companies for long-term requirements, though the full benefit depends partly on market recovery and the extent of Chinese dumping.
• China Plus One tailwind: International agrochemical companies are actively seeking to diversify supply chains, and Jubilant is positioning to capture a major proportion of the capacity previously served by Vertellus from its US plant.

Deepak Jain: "we are the only scale and world's biggest remaining non-Chinese player in this segment. And people want to diversify their supply chain. So, they're not going to go to China for 100% of their requirements."

Nutrition & Health: Stabilizing Demand, Margin Pressure

• Volume recovery underway: Nutrition volumes improved after a weak prior year, with stable demand and improved pricing for Niacinamide; Q1 had seen pent-up demand, and Q2 began to stabilize toward normal levels.
• Chinese pricing aggression: Margins remain under pressure from one or two Chinese players pricing aggressively, a dynamic management hopes will stabilize in the coming one or two quarters as the market adjusts.
• Animal nutrition traction: Volume growth continued in premixes, particularly mineral premixes, emulsifiers, chromium, and herbal formulations, supported by capacity enhancement plans for Choline and Specialty Premix.

Chemical Intermediates: Commodity Cycle Weighs on Revenue

• Acetic acid price deflation: Revenue declined YoY primarily due to significantly lower acetic acid prices, which management sees as range-bound at \$400–\$500 for the foreseeable future with no significant change expected.
• Acetic Anhydride leadership maintained: The new plant at Bharuch stabilized during the quarter, and the company continues to hold market leadership domestically and internationally, with 60–65% of business now on long-term contracts, particularly in European export markets.
• Demand-side softness: Muted demand from agrochemical and paracetamol end-use customers, who are maintaining lower inventory levels, led to slightly lower volumes after the company also rationalized ethyl acetate sales.

Costs, Margins & Project Lean

• Employee cost spike: Employee costs rose due to hiring in anticipation of demand for new projects that did not fully materialize, plus annual increments effective from Q2; the decline in Chemical Intermediates revenue also made the cost look higher on a percentage basis.
• Energy cost relief: Softening coal prices and internal efficiency efforts brought power costs down to 13.1% of revenue, though coal has not returned to historical lows; a new boiler investment by Q4 FY24 and a target to quadruple renewable power share by FY28 aim to reduce this further.
• Project Lean launched: A new initiative to remove overhead inefficiencies and optimize costs was started in the last couple of weeks, with management hopeful of seeing impact over the next two quarters, though specific steps and targets remain undefined and undisclosed.

Deepak Jain: "we are still defining that, this is a very recent initiative. In the last couple of weeks only, we have identified some areas. And given the nature of this initiative, obviously, I can't disclose the details."

Capex & Capacity Ramp-Up

• Capex plan unchanged: The company remains committed to its defined capex plan, with INR330 crore expected in H2 FY24, mostly directed toward the agro actives/intermediate plant, cosmetic-grade Niacinamide, Diketene derivatives, and a new boiler and power plant at Bharuch; another one-third of the INR2,000 crore program is to be invested this year and the rest next year.
• New capacity ramp-up: Plants commissioned last year are operating at 50–75% utilization, with management hopeful of higher levels by Q1 FY25; new capacity coming this year will take a normal six-to-twelve-month ramp-up, though market conditions could delay the trajectory by one or two quarters.
• Revenue potential: The company is on track to reach the full potential revenue of INR1,000 crore-plus from last year’s capacity as markets bounce back, with another INR600 crore of capacity being added this year expected to reach full potential in about 12 months, targeting a steady-state ROCE of around 20%.

Guidance & Commitments

Key Metrics