Q3FY24 Review: Deepak Nitrite: Intensifying capex plans

16 Feb 2024 , 01:54 PM

Deepak Nitrite reported in-line Q3 with phenolic business continuing to outperform advanced intermediates. The company continued to improve efficiencies through de-bottlenecking capacities and increasing output of select products. The broad product portfolio has enabled it to counter balance soft demand in advanced intermediates. Projects worth Rs20bn are slated to get commissioned in CY24 and should yield results in FY25. Rs90bn MoU opens up visibility beyond FY26. Analysts of IIFL Capital Services largely maintain analysts of IIFL Capital Services FY24- 26 earnings estimates EPS and their TP rolled over to Mar’25 goes up to ₹2,320. Maintain ADD. 

Phenol drives Q3 performance: 

Deepak Nitrite’s Q3 performance was driven by phenolic business and was fuelled by healthy sales volumes and better plant efficiency. The installed advanced process control system at DPL allowed for highest ever quarterly production of Phenol (88,378MT) and Cumene (121,571MT). Advanced intermediates products serving end user industries like agrochemical and textiles were under pressure while other applications witnessed volume led sequential improvement. 

Intensifies investment plans: 

Subsidiary, Deepak Chem Tech Limited (DCTL) has inked MoU worth Rs90bn with the Government of Gujarat. This is in addition to earlier MoU worth Rs50bn thereby taking the total investment plant to upwards of Rs140bn. The company will be investing Rs90bn across polycarbonate, methyl methacrylate (MMA)/Poly methyl methacrylate (PMMA) Resins & Compounds and Aniline. It also inked term sheet with Petronet LNG to offtake 250ktpa of propylene and 11ktpa of Hydrogen for its expanded capacities via pipeline from Petronet LNG (Dahej). The arrangement spans 15 years from the initial delivery of Propylene and Hydrogen. This long-term supply agreement provides Deepak with assured access to crucial feedstock for its production processes 

Rs20bn worth projects commissioning in CY24: 

Polycarbonate compounding project is under implementation with seeding programs for compounds getting initiated since Nov’23. The construction work of photo halogenation and fluorination are underway with plant commissioning expected by end FY24. Other expansion projects including MIBK, MIBC and hydrogenation are on track to get commissioned this year. Projects worth Rs20bn are slated to get commissioned between Jan-Dec’24.