Deepak Nitrite Limited Q1 FY23 Earnings Conference Call Insights

Key highlights from Deepak Nitrite Limited (DEEPAKNTR) Q1 FY23 Earnings Concall

Management Update:

• DEEPAKNTR said that the company is increasing its capacity for in-house waste treatment and is expected to result in a decrease in its footprint. The company added that this would be increasing its ability to backward integrate, de-risking its own supply chain.

• Going forward, DEEPAKNTR is foreseeing strong growth for India over the medium to long term due to the rising market demand on a global scale.

Q&A Highlights:

• Nirav Jimudia from Anvil Research asked about MIBC capacity and when these projects are going to get commissioned. Sanjay Upadhyay Group CFO said that the company is investing INR700 crore for solvents in Phenolics which includes MIBK, MIBC and other solvents also. MIBC out of this is 8,000 tons.

• Levin Shah with ValueQuest asked about input costs going up substantially and what’s the situation post 1Q23. Maulik Mehta CEO replied that the largest raw material purchases DEEPAKNTR make as a group are into petrochemical, benzene, toluene, and propylene. The margins is expected to strengthen in the near to medium term as there is a decrease in price of RM.

• Levin Shah from ValueQuest enquired about the quantum of expansion in Phenol and the capex required. Maulik Mehta CEO replied as the capacity stands at 2,50,000, and adding 15,000 to 20,000 above that will be done in the next 1-2 quarters. By FY24 end, DEEPAKNTR expects to be 50% over the current capacity of 200,000 and capex won’t be significant.

• Parisha Agarwal of Jaypee Capital asked that expecting the RM prices softening from here on, if there will be risk of inventory loss. Maulik Mehta CEO answered that it is dependent on products and the macroeconomic environment shaping up. Also, the company is not seeing any inventory losses.

• Parisha Agarwal of Jaypee Capital enquired about the industry demand and growth for solvents. Maulik Mehta CEO replied that the demand is significant and it will continue to grow. In MIBK, MIBC DEEPAKNTR is not seeing any problem supporting the Indian supply customers.

• Saurabh Kapadia from Asian Market Securities asked about the expansion and commissioning timeline on the chlorination and photochlorination side. Maulik Mehta CEO answered that the plant commissioning will be over the next 10 months or so.

• Saurabh Kapadia from Asian Market Securities also enquired that on the insurance claim side, if the company has accounted any loss of profit in 1Q23. Sanjay Upadhyay Group CFO answered that the company has not incurred any loss in the quarter.

• Rohit Nagraj from Centrum Broking asked about the volume growth on a YonY basis for new segment advanced intermediates. Sanjay Upadhyay Group CFO said it is not a new segment. In 1Q23 the volume growth was not substantial due to an incident of fire and a large site was not operational for an entire month.