Deepak Fertilizers Q3 2022 Concall Highlights

Operational Highlights

  • During Q3FY20 the topline jumped by 35%. 
  • Revenue from operations stood at  ₹1956 Cr from  ₹1447 Cr in Q3FY21
  • EBITDA improved by 62%  to  ₹352 Cr from  ₹217 Cr in Q3FY21
  • Finance Cost reduced by 15.4% YoY primarily driven by better working capital management
  • Reduced net debt by roughly  ₹240Cr 

Segment overview

Chemicals

  • Chemical business contributed 60% of revenues 
  • IPA and NA (pharma/speciality) together contributed 20% to revenues
  • Production at Dahej WNA Plant suffered due to technical issues which have been resolved and normal operations resumed in Dec 2021.
  • Despite significant increase in Ammonia Prices, Nitric Acid demonstrated improvement in both volumes(6%) and margins backed by the improved demand from the downstream industry
  • Tsunami in raw material price hike as ammonia jumped up by 115% RGP by 76% followed by potash and coal on YoY basis. These challenges were overcome by customer resilience to pass through the prices
  • Despite adverse impact of increasing Ammonia and Commodity costs, margins in all product segment (i.e. HDAN, AN Melt and LDAN) improved as supported by robust demand.
  • Capacity utilisation for TAN is 100% for Q3 and  9M FY22
  • TAN (mining chemicals) together contributed 20% to revenue

Fertiliser

  •  40% was contributed from fertiliser business
  • Volumes in NPK were lower 
  • Early onset of winter & higher required moisture following a delayed withdrawal of monsoon made favourable condition for Rabi Sowing
  • Fertiliser segment profitability was impacted due to unfavourable movement of key RM Prices Yo-Y (Ammonia▲ ~115%; Phos Acid ▲ ~78.5%)
  • Capacity utilisation NP/NPK 47%; Bensulf 36%

Strategy

    • Focus on more specialty and customer centric products and move up the value chain
    • Raw material used for IPA is propylene whereas deepak nitrite manufactures IPA from acetone. 
    • Last year IPA performed significantly last year compared to this year because prices are subdued in FY22 resulting pressure on margins
    • Using the IPA in end user segment where the margins are better
    • Evaluating on expansion for acetone based IPA
    • TAN has applications in all the mineral mining activities as the explosive solutions but mostly 55-60% is used in coal mining
    • 2-2.5 lakh tons increase in demand for TAN annually
    • Minings activities are subdued in 2nd quarter, Q3 and Q4  are quarters where TAN demand is higher
    • Significant flooding in coal india mines which resulted in beginning production from december, under favourable conditions the mining begins from october
    • New capex(ammonium nitrate) at taloja will be zero liquid discharge plant
    • The regulations doesn’t mandate, however efforts are being taken to reduce Nox emission thus controlling the air pollution
    • 3 main objectives- timely execution of capes, product diversity and technology enhancement
    • Currently working on debottlenecking of TAN plant
    • Strong market for products in maharashtra Gujarat and karnataka and expanding to other geographies

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