Rossari Biotech Management Meet Key Takeaways - FY24 Should Be The Year Of Hope: Nirmal Bang

Nirmal Bang Report

We recently interacted with the management of Rossari Biotech Ltd. in order to understand the growth outlook across segments, margin trajectory and update on new business developments, which could have an impact on its earnings. Following are the key takeaways from the interaction.

• Sequential margin recovery is expected to continue, led by better mix, softening raw material prices, efficient pass-through and operating leverage. Key raw materials are down by ~40% this year, but decline in end products in most cases is comparatively lower. This has led to a better gross margin performance. However, in select segments such as homecare, end products’ pricing is also under pressure.

• In the home-personal care and performance chemicals segment, the primary focus is restoring the growth trajectory over the next one-two years. Customers’ loss in HPPC has been adequately compensated through other orders, but quarterly growth is flattish. The management expects 17-18% margin in this business in a normal environment. Efforts are on to increase engagements with multi national companies in order to ensure customer stickiness and consistency in earnings. Also, there is enough headroom to grow by gaining wallet share over the next few years. HPPC segment business is majorly done with direct clients. Manufacturing facilities are fungible and Rossari will focus more on disinfectants for hospitals and pharma companies as these are high-margin products.

• Apart from homecare, the management is working on introducing new products in the paints segment. Water treatment, ceramics etc. are other focus areas. In paints, Rossari is focusing on defoamers, coatings, silicone products, surfactants from Unitop etc. Most products in the paints segment are import substitutes with very limited or no competition.

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