Capitaline

Results 03-Aug-22

Analysis

Deepak Nitrite

PBIT margin down 1170 bps to 15.5%

Deepak Nitrite consolidated net sales increased 34.84% to Rs 2057.99 crore in Q1FY23 compared Q1FY22. Sales of Phenolics segment has gone up 33.62% to Rs 1,334.93 crore (accounting for 64.65% of total sales). Sales of Advanced Intermediates segment has gone up 38.45% to Rs 729.98 crore (accounting for 35.35% of total sales). Inter-segment sales rose from Rs 0.11 crore to Rs 6.92 crore.

Profit before interest, tax and other unallocable items (PBIT) has slumped 22.75% to Rs 320.44 crore. PBIT of Phenolics segment fell 34.64% to Rs 187.74 crore (accounting for 58.59% of total PBIT). PBIT of Advanced Intermediates segment rose 4.05% to Rs 132.70 crore (accounting for 41.41% of total PBIT).

PBIT margin of Phenolics segment fell from 28.75% to 14.06%. PBIT margin of Advanced Intermediates segment fell from 24.19% to 18.18%. Overall PBIT margin fell from 27.18% to 15.52%.

Operating profit margin has declined from 29.58% to 17.30%, leading to 21.16% decline in operating profit to Rs 355.98 crore. Raw material cost as a % of total sales (net of stock adjustments) increased from 56.44% to 67.27%. Employee cost decreased from 4.25% to 3.81%. Other expenses rose from 11.47% to 12.20%. Power and Oil fuel cost rose from 5.49% to 6.26%.

Other income rose 16.48% to Rs 9.61 crore. PBIDT fell 20.48% to Rs 365.59 crore. Provision for interest fell 21.48% to Rs 8.59 crore.

PBDT fell 20.46% to Rs 357 crore. Provision for depreciation fell 3.86% to Rs 41.88 crore.

Profit before tax down 22.24% to Rs 315.12 crore. Provision for tax was expense of Rs 80.5 crore, compared to Rs 102.62 crore. Effective tax rate was 25.55% compared to 25.32%.

On June 02, 2022, an incidence of fire occurred around the warehouse section of company`s one of the manufacturing sites located at Nandesari, Gujarat. This incident led to damage of certain property, plant and equipment, inventory and has interrupted business. Upon receiving directions from various authorities, operations have been resumed in a phased manner at entire plant at Nandesari except for affected areas of Nitrite section for which the company is on its way to complete the activities at the soonest possible time frame. The company is adequately insured for reinstatement value of damaged assets and loss of profits due to business interruption. The company has lodged claim of this incident with the insurance company and the survey is currently ongoing.

The company has estimated and recognised an initial loss of Rs 47.20 crore on account of damage to certain property, plant and equipment & inventory and has recognised insurance claim receivable to the extent of aforesaid losses. Further, the company is in the process of determining final claim for reinstatement of assets based upon estimated cost. The aforementioned losses and corresponding credit arising from insurance claim receivables has been presented on a net basis (Rs Nil) under exceptional Items in the above results for the quarter ended June 30, 2022.

Net profit attributable to owners of the company decreased 22.47% to Rs 234.62 crore.

Promoters’ stake was 45.72% as of 30 June 2022 ,compared to 45.69% as of 30 June 2021.

The Group has planned introduction of several downstream chemicals and complex chemical platforms which shall significantly diversify its operations adding to the existing wide range of value-added product mix. It has significant presence in value chain from basic intermediates to fine and speciality products to performance products through integrated operations with processes ranging from manufacturing basic intermediates to niche and complex intermediates, leading to high dependency on each other as most of the products are forward-backward integrated, serving varied end-user industries across all the geographies. This gives flexibility to focus on manufacturing products that enjoy encouraging demand and offer better price. Further, over the period of time, the business scenario and macro-economic conditions have changed.

Owing to increasing number of facilities catering multi products, integrated production processes, similar economic characteristics of products and business scenario, the Chief Operating Decision Maker (CODM) evaluates the performance of the Group as two business segments and allocates resources based on value generated from these segments, as compared to four business segments reported earlier in Consolidated financial results (Basic Intermediates, Fine & Speciality chemicals, Performance Products and Phenolics). Accordingly, the operations of the Group are reported under two business segments from the quarter ended June 30, 2022 and has re-casted comparative periods to confirm to the way the Group internally manages and monitors segment performance: a) Advanced Intermediates and b) Phenolics

Full year results analysis

Net sales of Deepak Nitrite has increased 56.02% to Rs 6802.19 crore. Phenolics segment sale at Rs 4,303.42 crore accounted for 63.15% of total sales. Advanced Intermediates sale at Rs 2511.05 crore accounted for 36.85% of total sales.

Profit before interest, tax and other unallocable items (PBIT) of the company was Rs 1,462.84 crore. PBIT of Phenolics segment at Rs 867.11 crore accounted for 59.28% of total PBIT. PBIT of Advanced Intermediates at Rs 595.73 crore accounted for 40.72% of total PBIT.

PBIT margin of Phenolics segment was 20.15% while advanced intermediates PBIT margin was 23.7%. Overall PBIT margin was 21.47%.

Operating profit margin has declined from 28.60% to 23.57%, leading to 28.59% rise in operating profit to Rs 1,603.58 crore. Raw material cost as a % of total sales (net of stock adjustments) increased from 52.05% to 61.04%. Employee cost decreased from 5.65% to 3.97%. Other expenses fell from 13.76% to 11.74%. Power and Oil fuel cost rose from 6.06% to 6.36%.

Other income rose 98% to Rs 42.61 crore. PBIDT rose 29.77% to Rs 1646.19 crore. Provision for interest fell 54.12% to Rs 34.04 crore. Loan funds declined from Rs 589.74 crore as of 31 March 2021 to Rs 315.03 crore as of 31 March 2022. Inventories rose to Rs 584.55 crore as of 31 March 2022 from Rs 382.69 crore as of 31 March 2021. Sundry debtors were higher at Rs 1,129.06 crore as of 31 March 2022 compared to Rs 756.30 crore as of 31 March 2021. Cash and bank balance rose to Rs 41.79 crore as of 31 March 2022 from Rs 33.43 crore as of 31 March 2021. Investments rose to Rs 439.02 crore as of 31 March 2022 from Rs 189.29 crore as of 31 March 2021 .

PBDT rose 34.98% to Rs 1612.15 crore. Provision for depreciation rose 16.43% to Rs 177.7 crore. Fixed assets declined from Rs 2,042.45 crore as of 31 March 2021 to Rs 2,036.37 crore as of 31 March 2022. Intangible assets increased from Rs 41.73 crore to Rs 49.29 crore.

Profit before tax grew 37.70% to Rs 1,434.45 crore. Share of profit/loss were nil in both the periods. Provision for tax was expense of Rs 367.81 crore, compared to Rs 265.91 crore. Effective tax rate was 25.64% compared to 25.53%.

Net profit attributable to owners of the company increased 37.49% to Rs 1,066.64 crore.

Equity capital stood at Rs 27.28 crore as of 31 March 2022 to Rs 27.28 crore as of 31 March 2021. Per share face Value remained same at Rs 2.00.

Promoters’ stake was 45.72% as of 31 March 2022 ,compared to 45.69% as of 31 March 2021 .

Cash flow from operating activities decreased to Rs 823.84 crore for year ended March 2022 from Rs 1,001.90 crore for year ended March 2021. Cash flow used in acquiring fixed assets during the year ended March 2022 stood at Rs 186.81 crore, compared to Rs 214.99 crore during the year ended March 2021.

The scrip is currently trading at Rs 1951

Deepak Nitrite : Consolidated Results
Particulars	2206 (03)	2106 (03)	Var.(%)	2203 (12)	2103 (12)	Var.(%)
Net Sales	2,057.99	1526.22	35	6,802.19	4,359.75	56
OPM (%)	17.3	29.6		23.6	28.6
OP	355.98	451.50	-21	1,603.58	1,247.03	29
Other Inc.	9.61	8.25	16	42.61	21.52	98
PBIDT	365.59	459.75	-20	1,646.19	1,268.55	30
Interest	8.59	10.94	-21	34.04	74.2	-54
PBDT	357.00	448.81	-20	1,612.15	1,194.35	35
Depreciation	41.88	43.56	-4	177.7	152.63	16
PBT	315.12	405.25	-22	1,434.45	1,041.72	38
EO Income	0	0		0	0
PBT after EO	315.12	405.25	-22	1,434.45	1,041.72	38
Taxation	80.5	102.62	-22	367.81	265.91	38
PAT	234.62	302.63	-22	1,066.64	775.81	37
EPS (Rs)*	#	#		78.2	56.9
Notes
* EPS is on current equity of Rs 27.28 crore, Face value of Rs 2, Excluding extraordinary items.
# EPS is not annualised
bps : Basis points
EO : Extraordinary items
Figures in Rs crore
Source: Capitaline Corporate Database

Deepak Nitrite : Consolidated Segment Results
	% of (Total)	2206 (03)	2106 (03)	Var.(%)	% of (Total)	2203 (12)
Sales
Advanced Intermediates	35	729.98	527.25	38	37	2,511.05
Phenolics	65	1334.93	999.08	34	63	4303.42
Total Reported Sales	100	2,064.91	1,526.33	35	100	6,814.47
Less: Inter segment revenues		6.92	0.11	999		12.28
Net Sales		2,057.99	1,526.22	35		6,802.19
PBIT
Advanced Intermediates	41	132.7	127.54	4	41	595.73
Phenolics	59	187.74	287.26	-35	59	867.11
Total PBIT	100	320.44	414.8	-23	100	1,462.84
Less : Interest		8.59	10.94	-21		34.05
Add: Other un-allcoable		3.27	1.39	135		5.66
PBT		315.12	405.25	-22		1,434.45

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