DEEPAKNTR - Deepak Nitrite Limited Share Price

In the Q1 FY26 earnings conference call, Deepak Nitrite's management, led by CEO Maulik Mehta, provided an optimistic outlook despite facing challenges in the market. They reported a revenue of INR 1,897 crore for the quarter, driven by steady volumes and an improved product mix in the Phenolics segment. Consolidated EBITDA rose to INR 197 crore, marking an 11% sequential increase, with margins expanding to 10%. Profit before tax also saw a 17% sequential increase to INR 138 crore.

Key forward-looking points from management included:

1. Anticipated Demand Recovery: Management projected a recovery in demand for agrochemical intermediates, although demand had been subdued, due in part to oversupply from China.

2. Expansion Projects: The company is progressing well on projects set to enhance backward and forward integration, including concentrated nitric acid and weak nitric acid plants, which are expected to be commissioned in Q2 FY26.

3. New Product Launches: Management is excited about the pipeline for new products, including a significant investment of INR 220 crore for a specialty agrochemical intermediate expected to be commissioned by March 2026.

4. Long-Term Growth Commitment: Deepak Nitrite aims to invest around INR 10,000 crore over the next three years, and the integrated polycarbonate project targeting commercial operations by December 2027 is a key focus, aiming for the production of 165,000 metric tonnes annually.

5. Sustainable Energy Initiatives: They are also prioritizing sustainability, projecting a reduction of eCOâ‚‚ emissions by 60%-65% through renewable energy initiatives, with cost savings from a Power Purchase Agreement expected from May 2026.

Overall, despite external pressures, the management remains confident in navigating challenges through strategic growth initiatives, market positioning, and operational efficiencies.

Major Questions and Answers from the Earnings Transcript

1. Question: "Can you help us understand the lower agrochemical demand? Is it due to destocking or oversupply from China? What gives us confidence in recovery?" Answer: Yes, while China has ramped up its capacity, primarily for final products, we focus on optimizing our cost structure as intermediates manufacturers. We remain confident that we can recover as we've engaged with strategic customers for pilot batches, and we're diversifying our product mix. Orders delayed are not lost. We anticipate recovery beginning January 2026, confirming strong ongoing demand despite current headwinds.

2. Question: "Could you clarify the proposed investment of INR 220 crore and its market potential?" Answer: The INR 220 crore investment is for a key agrochemical intermediate, designed to serve both an agrochemical client with patented products and industries like cosmetics and polymers. Commissioning is slated between January and March 2026, enabling us to engage with customers via plant-relevant batches to establish long-term contracts, underscoring the plant's flexibility to produce diverse high-demand products.

3. Question: "What is the timing for potential revenue from the new polycarbonate facility? Will this impact other products in the pipeline?" Answer: The polycarbonate facility allows us to fast-track our validation cycle, aimed more at long-term strategic positioning than immediate revenue. While it will generate some revenue this year, the focus is on preparing for full-scale production to meet growing demand post-2027, leveraging established relationships and technical expertise to expedite customer approvals.

4. Question: "When do you expect the benefits from the nitric acid project to begin reflecting in margins?" Answer: We're in trial production and anticipate operational benefits from both nitric acid plants starting in Q3 FY26. We expect these will enhance Advanced Intermediates segment margins by 200-300 basis points, contributing positively to our profitability and integrating effectively with our growing nitration capabilities.

5. Question: "With ongoing capex plans, do you foresee any impact from potential U.S. tariffs on your operational strategy?" Answer: Our capex plans remain unaffected by the tariff situation. We're focused on domestic production using local feedstock to mitigate risks associated with international trade conflicts. This strategy is designed to stabilize our supply chain and ensure we can serve our domestic customers with minimal disruption, allowing us to capitalize on India's robust market demand.