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Deepak Fertilizers and Petrochemicals reported a net profit of Rs. 434 Cr.

Deepak Fertilizers and Petrochemicals reported a net profit of Rs. 434 Cr.

Deepak Fertilizers and Petrochemicals reported a net profit of Rs. 434 Cr.

Deepak Fertilizers reported total revenue of Rs. 3031 Cr. in June 2022. The chemicals segment contributed around 87% of total profit. Chemicals revenue was at Rs. 1771 Cr, double from the previous year’s same quarter. The fertiliser segment’s revenues increased by 26% YOY. EBITDA margins increased from 15.2% in Q1 FY22 to 24.3% in Q1 FY23. The specialty segment portfolio grew by 321% YOY from Rs. 173 Cr. in Q1 FY22 to Rs. 729 in Q1 FY23.

Future Developments

The Greenfield ammonia plant is under development and is moving ahead as per the planned schedule. The farmer connect initiatives have increased customer experience, which will be instrumental in building market position in the crop nutrition business. The second quarter is a seasonally low period for mining activity due to the monsoon. The prices of imported Ammonium Nitrate (AN) have started to moderate. The TAN business aims to effectively compete on pricing to ensure reliability and supply security. The demand and pricing for nitric acid are relatively passive as they are typically expected during the monsoon season. The focus on customised offerings for the Solar/Steel and Parma sectors will help to gradually position Acids/IPA as a specialty chemical sector. A gradual slowdown of the raw material and ammonia prices would also help to sustain a reasonable delta for the TAN/Acid businesses.

Valuations:

EPS for the company is Rs. 36.13 compared to Rs. 23.19 in the previous quarter. The P/E ratio for the stock is at 9.15 times and 3 years’ P/E is at 7.69 times. The ROCE and ROE are 19.8% and 20.7%, respectively. The debt to equity ratio is 0.68. The interest coverage ratio is 10.5 and the dividend payout ratio is 16% for the year ending March 2022. The script closed at Rs.746, up by 4.99% or 35.50 points, which is its upper circuit. 

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