DEEPAKNTR - Deepak Nitrite Limited Share Price

In their Q4 & FY25 earnings call, management expressed a cautiously optimistic outlook for Deepak Nitrite Limited. They reported a total income of INR 8,366 crore for FY25, marking an 8% growth. Despite facing significant external challenges like geopolitical tensions and an overall slowdown in demand, the company achieved a consolidated EBITDA of INR 1,176 crore, maintaining levels close to the previous year.

Major forward-looking points highlighted included:

1. Renewable Energy Initiatives: By the end of FY26, nearly 60% of total energy consumption is expected to be met through renewable hybrid power arrangements, aiming for a 60% reduction in carbon emissions.

2. Project Pipeline: The company anticipates the commissioning of several key projects in FY26, including a state-of-the-art R&D center in Savli with an investment exceeding INR 100 crore and the critical nitric acid unit scheduled for completion by Q2 FY26. Expansion projects are also underway in nitration and hydrogenation.

3. Phenol and Acetone Integration: The board has approved an investment of INR 3,500 crore for new capacities in phenol, acetone, and IPA, contributing to a total of approximately INR 8,500 crore in the PC resins project, aiming to position Deepak as a leading producer globally.

4. Product Diversification: New product offerings in pharma and personal care segments are anticipated as part of the company's strategic roadmap, with a focus on higher-value products.

5. Market Conditions: Management expects a recovery in domestic demand for several key products, improving growth in FY26. However, they noted potential geopolitical uncertainties could impact forecasts, making precise guidance difficult.

6. Dividend Declaration: The Board has maintained a dividend of INR 7.5 per share, reinforcing their commitment to return value to shareholders.

Overall, Deepak Nitrite's strategic focus on innovation, sustainability, and capacity expansion bodes well for potential profitability and growth in the coming fiscal years.

Here are the major questions and their respective answers from the Q&A section of the earnings transcript:

1. Question by Sanjesh Jain:
Can you give us a little bit more color on new products for agrochemicals and pharma, and what capex is expected?

Answer:
Thank you for your question. The new products will require minimal capex, mainly for balancing equipment, as we are utilizing existing assets. We plan to strategically partner with downstream customers for production. The focus is on higher value products through campaigns which will run on existing assets. Specifically, we will involve in "Friedel-Craft" chemistry that caters to personal care and has broad applications, including future integration into polycarbonate resin production.

2. Question by Nirav Jimudia:
How do we compare with competitors on ammonia sourcing for our nitric acid plant?

Answer:
Deepak has a robust ammonia purchasing pipeline for over 54 years, allowing for reliable internal consumption for nitric acid production. We don't compete directly with those having captive ammonia; our model focuses on efficiency and reliability in sourcing. We made strategic investments to ensure flexibility with our ammonia sourcing. Additionally, we have expanded ammonia storage, which will enhance operational efficiency.

3. Question by Abhijit Akella:
What's the outlook for normalized margins across segments?

Answer:
At this time, I cannot provide a specific margin range. However, we believe normalized margins will exceed current levels. Recovery in margins may not strictly follow Q3 or Q4 patterns but is expected to occur over the yearly timeframe. We remain agile and open to taking advantage of short-term opportunities as they arise.

4. Question by Vivek Rajamani:
Are we recouping market share lost to imports in the phenol market?

Answer:
Yes, our market share remains intact, and we are seeing growth. Despite facing raw material pricing pressures, our volumes have been stable and we expect Q1 performance will be much better than Q4. The domestic market is strong, and we're well positioned to absorb demand as conditions improve.

5. Question by Aditi Loharuka:
How do you justify large capex amidst global trade uncertainties?

Answer:
The capex has been strategically planned to strengthen our integrated business model. We are investing in projects that will enhance self-reliance and efficiencies. Despite market conditions, we believe our investments are well-justified given the demand potential and our strategy to capitalize on geopolitical dynamics.

Feel free to ask anything else or for more details on specific answers!