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