DEEPAKFERT - Deepak Fertilizers &Petrochemicals Share Price

In the Q4 FY 2025 Earnings Conference Call, management provided a positive outlook for Deepak Fertilisers, highlighting strong financial performance and strategic progress. The key forward-looking points include:

1. Financial Growth: The company reported a 28% increase in Q4 top line, reaching INR 2,667 crores, while the full-year top line grew by 18% to INR 10,274 crores. Notably, the PAT increased by 21% to INR 278 crores in Q4 and doubled year-on-year to INR 945 crores for FY 2025.

2. Focus on Specialty Products: Specialty products now contribute 22% of total revenue, with significant advances in the Crop Nutrition and Technical Ammonium Nitrate (TAN) segments. The transition from commodity offerings to specialties continues to gain traction, with crop-specific fertilizers playing a key role.

3. Capacity Expansion Projects: The company is investing in enhancing nitric acid capacities at Dahej and technical ammonium nitrate at Gopalpur. These projects, expected to be commissioned in H2 FY 2026, position the company to meet growing demand while utilizing established market knowledge.

4. Debt Management: Management emphasized strong cash flows, reducing net debt by INR 120 crores, resulting in a net debt-to-EBITDA ratio improvement from 2.66x to 1.72x. Net debt is projected to slightly peak at INR 5,000 crores during the ongoing CAPEX cycle.

5. Market Positioning: Management expressed confidence in capturing market share, citing a structural demand growth of 6-7% for TAN and robust positioning against competitors, bolstered by a unique integrated supply chain and long-term LNG contracts.

6. Outlook for FY 2026: Given the expected continued macro tailwinds and focus on high-margin products, management remains optimistic about delivering sustained growth and value for stakeholders in FY 2026.

7. Dividend Declaration: The Board has recommended a 100% dividend, reflecting the company's strong earnings and commitment to returning value to shareholders.

Major Questions and Detailed Answers from Q&A Section

1. Question: What is the current ammonia pricing and what was your annual savings in FY "˜25 from the ammonia plant?
   Answer: The current price of ammonia is around $300, with an average price of about $330 last quarter. We do not specifically analyze savings from the ammonia plant in isolation since we maintain an integrated supply chain. Our EBITDA breakeven is approximately $310 to $320.

2. Question: What would be our EBITDA from our Industrial Chemicals business and the Fertilizers business?
   Answer: We don't disclose segment-wise EBITDA margins. However, the consolidated EBITDA stands at 19%. Each business varies in profitability; the Industrial Chemicals segment is mid-level while Fertilizers tends to be lower.

3. Question: What would be our peak debt levels over the next 2 years considering upcoming CAPEX?
   Answer: Currently, we are at about INR 3,300 crores in debt. As the CAPEX cycle comes to fruition, we expect it to peak at around INR 5,000 crores.

4. Question: Your other expenses have increased. What's the reason for this?
   Answer: The rise in other expenses is largely attributable to the significant growth in the Crop Nutrition business, which has higher freight costs compared to our other segments.

5. Question: What is the expected ROC from the new nitric acid and TAN projects?
   Answer: We're targeting a healthy ROCE of around 18% to 20% for our new projects, requiring about 80%-85% utilization for this figure.

6. Question: How do you foresee the TAN market in relation to new competitors and potential pricing increases?
   Answer: There is currently strong demand for TAN, with a shortage in the market. Though new capacities will be introduced, the industry has been growing at 6-7% annually, leaving room for new players without significantly impacting pricing.

7. Question: For FY "˜26, given your focus on value addition, what volume growth do you anticipate?
   Answer: We expect more than 2-3% volume growth for FY "˜26, though a leap in growth will come once the Gopalpur facility is operational.

8. Question: Can you elaborate on your ammonia business and current breakeven costs?
   Answer: Our EBITDA breakeven for ammonia is maintained around $310 to $320. This is influenced by our multi-source gas procurement arrangements, leading to some variability in costs.

9. Question: How do the metrics differ for your B2C TAN business?
   Answer: Moving to B2C enhances our pricing power, market visibility, and ability to protect market share. Currently, 18% of our sales come from direct consumer engagement, which provides us with additional margin benefits.

10. Question: What is the expected total CAPEX for FY "˜26 and FY "˜27?
    Answer: The total CAPEX for FY "˜26 is estimated at around INR 4,500 crores, with about INR 3,100 crores expected to be utilized this year for ongoing projects. Maintenance CAPEX runs between INR 300-400 crores annually.

Each answer stays succinct while addressing all key details, figures, and guidance provided in the Q&A section.