NEOGEN CHEMICALS Q1FY23 Earnings Call Highlights

• itnessed significant increase in the prices of raw materials linked to lithium, which the company was able to pass on to the customers, resultantly protecting the absolute EBITDA.

• During the quarter under review, Organic Chemicals segment revenue enhanced by 32% year-on-year, while growth in Inorganic Chemicals stood at 243%. This was in line with internal expectations and was supported by incremental gains from the capacity expansion initiatives undertaken across both the business segments. The demand profile of products remains up, and confident in maintaining this growth momentum going forward.

• Have several CapEx initiatives lined up this year and next year that will boost performance trajectory in the existing as well as new business of lithium and battery chemical space. These initiatives are getting executed as per earlier stated time lines.

• Discussions with both domestic and global customers are advancing as expected, and there is continued interest in robust demand. As a process, have started submitting samples for technical approvals and evaluations are underway to approve Neogen as a vendor at customer end. Will align large CapEx plan with lithium and battery chemical space in H2 of the current financial year once there is comfort on that.

• In the CSM and Advanced Intermediates business, excited with the current momentum, started witnessing traction from even other sectors that are non-agro and non-pharma, including the traditional pharma and agro segments. Focus is to increase the revenue contribution from these segments, which is in line with efforts to expanding the portfolio of value-added products.

• Separately, post Board approval last quarter, started initial work at the Dahej plant to deploy up to INR 150 crore CapEx in this financial year. This will be used for increasing the manufacturing capacity of specialty organic chemicals by 60,000 liter reactor capacity, expanding manufacturing capacity of inorganic salts from 1,200 metric tons to 2,400 metric ton, setting up new capacity in existing inorganic MPP for 400 metric tons per annum for manufacturing, specialty lithium salts and editors for electrolyte used in lithium and battery advanced chemistry cells and overall site development at Dahej as well. All this expansion will come on stream by June 2023 and will help significantly elevate revenue trajectory from the current levels.

• FY '24 revenue guidance remains unchanged at INR 700 crore to INR 725 crore, while by FY '25, '26, will be able to add another INR 250 crores to INR 300 crores at full utilization level, resulting in a revenue potential of approximately INR 1,000 crores. Here the incremental revenues as well as the revenue guidance for FY '24 is estimated based on stable lithium prices.

• Working capital utilization was slightly higher in end of Q1 because as had planned for a higher production, and there's a little bit of inventory build up because capacity utilization was much higher, although the organic revenue was a bit lower. So there is higher working capital utilization but more or less in line with expectation for the business increase targeting for this year.

• Hoping that by FY '24, as guided, target is somewhere at around 100, 110 days of the net working capital cycle based upon net sales number of days.

• Have actually 3 or 4 molecules which are now in flavors and segments & another is a very typical industry, which is like basically like a specialty chemical required for customers in Japan.

• Neogen importing close to around 60% to 75% of the lithium carbonate, which was getting imported into India for like the specialty applications.

• Dahej still has space for 2 MPPs, at least. So 2 MPPs meaning, a revenue of additional around INR 500-750 crores depending on like the product mix, et cetera, is something that can still get out of Dahej site.

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