Segment wise, Basic Chemicals Segment revenue stood at Rs 252.65 crore, up by 15% YoY and accounted for 22% of sales. PBIT from the same was up by 74% to Rs 58.98 crore and accounted for 23% of total PBIT with PBIT margin at 23.3% as compared to 15.4% for Dec18 quarter. Volumes in the BC segment improved 23% Y-o-Y given its cost leadership position in the market as well as efforts towards widening customer base.

Fine and speciality chemicals segment revenue stood at Rs 173.22 crore up by 17% YoY and accounted for 15% of sales. PBIT from the same was up 72% to Rs 58.73 crore and accounted for 23% of total. PBIT margins stood at 33.9% as compared to 23.1% for Dec18 quarter. Solid realisation gains as well as favourable product mix in the export markets boosted the FSC performance during the quarter under review.

Performance products segment revenue stood at Rs 176.09 crore up by 77% YoY and accounted for 15% of sales. PBIT from the same was Rs 95.31 crore compared to Rs 18.12 crore in Dec 18 quarter and accounted for 38% of total PBIT. PBIT margins stood at 54.1% as compared to 18.2% for Dec18 quarter. Higher realisations reported were driven by demand-supply mismatch for key products in the PP segment. Overall, DNL's position of being a fully integrated manufacturer of FWA has been yielding encouraging results.

Phenolics segment revenue stood at Rs 535.06 crore compared to Rs 314.33 core in Dec18 quarter and accounted for 47% of sales. PBIT from the same was Rs 40.5 crore compared to Rs 27.22 crore and accounted for 16% of total PBIT. PBIT margins stood at 7.6% for Dec19 quarter.

"I am delighted to report another quarter of strong earnings performance. Our profitability increased manifold with PBT and PAT increasing by 298% and 349% respectively. We have capitalised on growth opportunities across global markets by demonstrating agility and nimbleness throughout our operations. We have exercised tight controls over production and inventories, constantly monitored global industry developments, taken appropriate actions while closely engaging with customers, all of which has helped us to optimise our performance.

It is heartening to share that all three SBUs have demonstrated encouraging growth momentum allowing us to report higher volumes. In our standalone operations, the percentage growth in exports on a YTD basis was 3 times as fast as growth in domestic revenues, clearly demonstrating our ability to win global market share. This also underlines our leadership position in key products predicated on a high degree of backward integration.

Deepak Phenolics, which was established last year, performed extremely well in terms of volumes. However, as a commodity product, it is susceptible to the global cycle of slowing economic growth and impact of input prices which have suppressed the margins. It is hoped that the commodity cycle will improve in the latter half of the next fiscal.

All in all, I am highly excited with the opportunities emerging across the landscape and we are focussed on execution by leveraging our expertise and competencies. Given the robust business visibility, we are planning expansions across all business segments to further foster our performance."

Revenues stood at Rs. 587 crore in Q3 FY20 as compared to Rs. 458 crore in Q3 FY19, higher by 28% Y-o-Y. Balanced growth across Basic Chemicals, Fine & Speciality Chemicals and the Performance Products segment resulted in robust topline performance during the quarter. Overall, this was supported by encouraging demand scenario of company's products in the export markets

EBITDA grew by 200% in Q3FY20 to Rs. 215 crore, as against Rs. 72 crore in the same period last year. Robust EBITDA performance was a result of operating leverage from higher volumes, realisation gains across most products and management efforts to optimise production schedules as well as focus on high-value high-margin products

PBT was at Rs. 191 crore in Q3 FY20, rising by 298% over Rs. 48 crore in the same period last year. PAT stood at Rs. 142 crore in Q3 FY20, as against Rs. 32 crore in Q3 FY19, registering growth of 349% on a y-o-y basis.

Performance for the nine months ended December 2019

For nine months ended December 2019, net sales rose 88% to Rs 3174.17 crore. The company operating margins increased 1070 bps to 24%. As a result operating profits rose 240% to Rs 762.54 crore.

Other income was Rs 34.18crore compared to Rs 2.25 crore. Interest cost was up 73% to Rs 87.67 crore. Depreciation rose 110% to Rs 103.5 crore. PBT was up 378% to Rs 605.55 crore.

Effective tax rate was down 760 bps to 27.5%. PAT reported was up 434% to Rs 438.73 crore.

For the 9 months, sales from the Basic chemical segment rose 11% to Rs 714.65 crore and accounted for 22% of sales. PBIT from the same was up by 50% to Rs 153.48 crore and accounted for 21% of total with PBIT margin at 21.5%.

Sales from the fine and speciality chemicals segment rose 3% to Rs 427.25 crore and accounted for 13% of sales. PBIT from the same was up 25% Rs 124.5 crore and accounted for 17% of total with PBIT margin at 29.1%.

Sales from the performance products segment rose 122% to Rs 613.58 crore and accounted for 19% of sales. PBIT from the same was Rs 343.24 crore and accounted for 46% of total PBIT with PBIT margin at 55.9%.

Sales from the phenolics segment was Rs 1469.9 crore compared to Rs 385.58 core in Dec18 and accounted for 46% of sales. PBIT from the same was Rs 123.71 crore and accounted for 17% of total with PBIT margin at 8.4%.

Update on Deepak Phenolics Ltd.

Deepak Phenolics Ltd. (DPL), a wholly-owned subsidiary of Deepak Nitrite Ltd., operates a Global Scale Plant to manufacture Phenol & Acetone, with a capacity of 200,000 MTPA and 120,000 MTPA respectively. This is supported by capacity to manufacture 260,000 MT of Cumene for captive consumption.

DPL performed extremely well on volumes as it reported capacity utilisation of over 100% during the quarter resulting in revenues of Rs. 550 crore and its maiden quarter of PAT. As global commodities, prices of both phenol and acetone are cyclical in nature. Even as the company navigates this phase of the phenol and acetone cycle, it is investing to develop value added derivatives through forward integration. It plans to commercially launch the first such product towards the end of current fiscal year and this represents the first step towards achieving the vision of developing a comprehensive basket of downstream derivatives.

Outlook by the company

Deepak Nitrite is well placed to address the opportunities emerging across the chemicals industry landscape on the back of its diversified product portfolio across key product categories. Moreover, its market leadership position with global clientele acts a catalyst for growth.

China, which enjoys a dominant position in the market, has been deemphasizing manufacturing of chemicals and high-complexity products. Further, global customers are also seeking to establish operations in alternate markets other than China for which India is better placed. Uncertainties caused by the corona virus are exacerbating the concerns around China. This is a tailwind for the speciality chemical industry and Deepak Nitrite is well placed and endeavours to continue to build upon its success in recent years.

DNL is secure on the raw materials front, since it sources most of its raw materials locally and has a well-integrated facility. It has also undertaken positions to ensure that supply of imported raw materials are covered for the current quarter causing no disturbance to operations as a result of the developments in China.

The scrip is currently trading at Rs 409