Emmbi Industries Q2FY18 Concall Summary

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 Financial Highlights

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  • In H12018, EBITDA levels are up by 70 basis points compared to H1 2017.
  • H1 2018 revenue growth is 13.66%.
  • But topline growth for Q2FY18 was flat because due to implementation of GST, there was overall domestic slowdown and opening 10-12 days of this quarter were extremely inoperative.
  • There is total debt of 86 crores split into 70 crores of working capital and around 16 crores of term debt.
  • PAT is under little bit of a strain because:
  • 1. Being an exporting company substantial amount of money has been locked in with the government in the form of the GST.Refund should be around December.
  • 2. Starting of two new product verticals with CAPEX in the past year resulted in appointment and induction of new people and that has brought some extra cost to the labor and wages cost.
  • But these are temporary issues which would be taken care by Emmbi and by the government on the respective levels which would lead to normal speed of operation in time to come.
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GST rate

  • In the 1st draft of GST, rate of pond liner was 28%. But in recent Guwahati conference, rate was changed from 28% to 18%. This would improve the spread.
  • Management revised future projections for this year from 18-20% to around 15-17%.
  • Poultry Curtain
  • This quarter’s new product is Poultry curtain. It is basically a light polarizer.
  • This product has the ability to filter light of a certain frequencywhich leads to accelerated growth of chicks naturally without external boosters like injections.
  • Conventionally, Tarpaulin of yellow color is in use which has no precise controlon the light frequency.
  • Right now, the product would be launched in Maharashtra and later Rajasthan and subsiding states would be included.
  • Business potential of around Rs. 20 crores in Maharashtra itself is expected.
  • This product did not need any specific CAPEX because the machinery and setup, which is available for the Pond Liner, can produce this product also.
  • Venky is the largest chicken supplier in India and they have relationship with Emmbi at the packaging side, so Emmbi is planning to have a direct relationship for poultry curtains  also.
  • A larger sales driver would be general distribution route which would be adopted to reach the deep rooted spread of village based poultries.

CAPEX

  • 22 crores of CAPEX was utilized for building the 6000 metric tonnes capacity.
  • 3600 metric tonnes is for pond ling or water conservation facility. 2400 is for food grade facility.
  • 3600 capacity would generate about Rs.35-40 crores revenue and 2400 capacity would create about Rs. 50-60 crores in about 6-8 quarters.
  • By March 2020 this water conservation business would generate around 80-100 crores at its full capacity.
  • Till 2020 no further CAPEX is needed other than maintenance & de-bottlenecking costs in the range of around 4-5 crores.

New Patents

  • Thought behind new patents is basically creating an additional revenue stream. So, when selling the pond liner, Emmbi would’ve created a range of accessories which would complement the pond liner.

Branding and Advertising

  • Emmbi is going ahead with branding and advertising campaign more focused in the villages so that farmers are educated about their products.
  • This would lead to reach around 20-22% of their topline through B2C route in next couple of years.

FIBC (Flexible Intermediate Bulk Container)

  • FIBC food grade production has been started and is going under certification.
  • Hence these bags mostly sold to the companies like cattle feed, where there is no restriction of certified food grade bag.
  • Certification process is of around 6 months, so by end of December, this product will get BRC and ISO 22000 food grade certification.
  • GST rate for FIBC is 5%.

Operations Overview

  • Run rate of pond liner business is approximately 3ponds/day. Right now business is little slow due to taxation system changes and monsoon season. But speed is picking up again.
  • Utilization for the entire capacity is around 85%.
  • Emmbi have connected to almost more than 15 excavation partners who owned earthmoving equipment and helped the people who intend to or decided to buy Emmbi pond liner to dig the pit and set up the things.
  • Plan has been made and resources have been created to achieve topline growth of 18-20% in FY19.

Export Market

  • Once poultry curtain gets accepted in Maharashtra market, Emmbi would start associating with other states and even overseas like New Zealand and UK where sunlight is very poor.
  • FIBC production have been started for export market for animal feed and fish feed but not for human consumption.

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