Deepak Nitrite Limited

Summary

Q4FY23 and FY23 Result Highlights

Company Overview

Deepak Nitrite (DNL) is one of the fastest growing and trusted chemical intermediates company in India with a diversified portfolio of products that caters to multiple industries with myriad applications. DNL is recognized globally as a ‘Responsible Manufacturer’ and as a ‘Supplier of Choice’ by marquee customers. Led by an able management team, DNL has leveraged process expertise, technological prowess and operational excellence to capitalise on opportunities for growth and deliver sustained value for stakeholders.

Q4FY23 and FY23 Performance

During FY23, the operating environment was characterized by sharp volatility as outbreak of the Russia-Ukraine war and resultant disruption in global supply chain scaused spike in several commodities and led to high inflationary pressures on inputs. Further, the fire at the NDS plant resulted in lost production and sales for about 40 days. Additionally, discontinuation of supply arrangements for certain inputs had to be made good by imports and alternate supply which led to additional cost. This disadvantage is being addressed through backward integration projects and the outcome will be seen once these projects are implemented. Despite these challenges, the company's business model proved resilient with incremental investments boosting through put and sustained demand from end-user industries driving growth.

Quarterly Financial Updates

DNL's year-on-year revenue growth was fueled by steady demand from end-user industries catered by high operationale fficiency as the company was able to operate its facilities at high utilization rates.

EBITDA has improved significantly on a sequential quarter basis as the company partially passed on higher input costs to customers and witnessed realization gains in select products.

Profit after tax has improved on a Qo-Q basis due to operating leverage combined with stable other income and lower finance cost.

Full Year Financial Highlights

The growth was lower during FY23 as negative 20% in PAT and 19% in EBITDA due to higher raw material prices.

Projects Updates

Concall Highlights

Financial Performance

In FY2023, revenue stood at Rs.8,020 crore which is significant as compared to Rs.6,845 in FY2022 higher by 17%. This growth was attributable to stable demand and high plant efficiency.

While EBITDA stood at Rs.1,337 crore against last year, it is lower by 19% on a year-on-year basis because last year’s base was very high.

PAT stood at Rs.852 crore in FY2023 versus Rs.1,067 crore last year. The results have been impacted due to war and resultant high input prices and resultant inflationary pressures. There is also an impact on the several external and internal factors as summarized by Maulik in his comments.

On business segemnt - Both business segment showed solid improvements contributing to strong revenue growth on a consolidated basis. The increase in demand and relation for our key products had the growth, despite the challenging environment, DNL remains focused on driving growth and expanding its operations to capture new opportunities.  

On debt front - While DNL has no debt, DPL has prepaid the term loan of an amount of Rs.61 crore in the fourth quarter. For the full year FY2023 the prepayment of term loan by DPL was Rs. 161 crore leading to a saving in interest cost. This has reduced the net debt to equity ratio to almost zero, that is 0.03 as compared to last year’s 0.20. On a consolidated basis, DNL remains debt free on a net.

On capex front - Rs. 2,500 crore capex includes fluorination and photochlorination project commissioning in Q3, phenol debottlenecking finishing in Q1, upstream project commissioning in Q4, and downstream derivative of acetone commissioning in Q1 of next year.

On Nandesari plant - Nandesari facility that occurred on 2nd June 2022. Against their insurance claim for loss of material damage, the company have received an interim payment of Rs.11 crore in March 2023 and further Rs.14 crore in April 2023 as an interim payment. The company hope to receive the balance in the coming quarter. 

Other Business Outlook

Biggest move by the government

Company's wholly owned subsidiary, Deepak Chem Tech Limited has signed a MOU with government of Gujarat on 23rd May, 2023 with intent to invest around 5000 crore in next 4 years for setting up a projects to manufacture speciality chemical, Phenol/acetone at Dahej /Nandesari plant.

Financial Snapshot

Risk

• Current market volatility
• Higher raw material prices which are hampering company's operating margin
• Forex volatility