Anand Rathi
Deepak Nitrite currently operates its businesses with bulk chemicals segment, fluorescent and whitening agents segment, fine and speciality segment and phenolics through its 100 percent subsidiary Deepak Phenolics Ltd, each contributing 33 percent, 15 percent, 19 percent and 33 percent to the revenues respectively.
During the latest results company has reported consolidated revenues of Rs 1,003.3 crore as against Rs 461 crore, a growth 117 percent, YoY. The growth excluding phenolic business was 32.5 percent which was mainly due to higher volumes and improved pricing in basic chemicals and performance products segment and remaining was contributed by phenolics business.
On profitability front, the company’s consolidated EBITDA margins stood 25 percent at Rs 250.5 crore in Q2FY19 as against 13.9 percent at Rs 64.2 million and its PAT margins stood 15 percent at Rs 150.1 crore as against 5.2 percent at Rs 23.9 crore in Q2FY19.
With the latest results reflecting positive outcome of company’s increased focus on adding high value products and moving higher in the value chain to improve its profitability in long term bodes well for its base business which should continue to show improvement in margins.
The company’s new Greenfield expansion plan at Dahej, Gujarat for manufacturing phenol (2, 00,000 tonne/year) and acetone (1, 20,000 tonne/year) has demonstrated successful operations and is currently operating at over 90 percent utilization levels.
The company is also incurring capex on development of downstream products for Acetone and same is expected to be commissioned towards the end of this financial year. All these should result in more sustained and profitable growth for the Company.
We expect phenolic business to show improved profitability and any expected decline in temporary higher DASDA prices should offset the bottom line and -also company’s forward integration in form of Acetone derivatives opens up new value addition prospects for the company. Buy Deepak Nitrite with target of Rs 496 per share.
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