Deepak Nitrite Limited Q3 FY23 Earnings Conference Call Insights

Key highlights from Deepak Nitrite Limited (DEEPAKNTR) Q3 FY23 Earnings Concall

Q&A Highlights:

• [00:17:26] Nirav Jimudia from Anvil Research asked about the rationale behind backward integration in fluorination space. Maulik Mehta CEO said that the capacities DEEPAKNTR is developing will cover all of its current and future requirements, and there will be plenty of supply for the company even with the increased demand.

• [00:25:24] Nirav Jimudia from Anvil Research asked about rationale behind infusing about $15 million to put up a sodium nitrate plant in Oman. Maulik Mehta CEO answered that the new facility in Oman will be of reasonable size compared to the plant in India but it will have the capacity to ramp up production quickly and will have the infrastructure to expand production further in Phase 2 and 3. The target is to get the project started within two years.

• [00:35:11] Vivek Rajamani from Morgan Stanley enquired about any change in trends in terms of end segment demand. Maulik Mehta CEO said that DEEPAKNTR is seeing a slightly higher level of optimism vs. 2Q. Customers are discussing longer-term outlooks and being more willing to buy larger volumes, run their plants at higher capacities, and hold onto more raw material stocks. However, caution is still advised as the global recovery is still uncertain.

• [00:37:58] Naushad Chaudhary at Aditya Birla asked about power cost outlook for the next 2-3 quarters. Maulik Mehta CEO said as the production and throughput of a phenolics plant increases, the associated power and fuel costs remain fairly consistent. However, due to fluctuations in coal and natural gas prices, these costs can vary over time. In recent weeks, coal and gas prices have improved, but their stability remains uncertain.

• [00:44:10] Chintan Modi from Haitong Securities enquired about the new investment of about INR1,000 crores and a part of which would go to polycarbonate compounding business. Maulik Mehta CEO said the compounding facility will be a world-scale facility that can make small and large batch orders to meet India’s fast-growing demand for compounds with certain properties. It will engage with key partners and start building relationships, applying and having products approved at their end. It will also manufacture polycarbonate and its upstream all the way to phenol, supplying to the compounding facility itself, and potentially selling into the market.

• [00:46:50] Chintan Modi from Haitong asked that once the company is done with backward integration projects what level of self-sufficiency would be achieved in advanced intermediates. Maulik Mehta CEO answered that the EBITDA percentage should improve by at least 2%, with the potential for more as production and debottlenecking increase, which will be margin accretive.

• [00:55:54] Meet Vora from Axis Capital asked to quantify the debottlenecking exercise the company is doing on phenol and acetone plant. Sanjay Upadhyay Group CFO replied that DEEPAKNTR will add around 50,000 tons and touch above 3000,000.

• [00:56:36] Manish Jain from MoneyLife Advisory asked if the company is witnessing moderation in prices, mainly for nitric acid, ammonia and caustic soda. Maulik Mehta CEO said prices are currently at an elevated level compared to last year, and while we may find some small pockets of opportunity, the prices are unlikely to reach the levels seen last year due to a lack of contractual agreements.

• [00:58:21] Manish Jain from MoneyLife Advisory enquired how the company is looking to strengthen its employee base in the medium term for the upcoming projects. Maulik Mehta CEO said he won’t go into numbers, but there will be significant additions. DEEPAKNTR said it recruits at the right time, not too early.