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Deepak Nitrite Ltd Q4FY21 Earnings Conference call Highlights

Deepak Nitrite Ltd Q4FY21 Earnings Conference call Highlights

Published on 31 May 2021 Views 203 Comments 1

Key Business Highlights for Q4FY21 & FY21

  • FY21 was Golden Jubilee year for the company that recorded 3% growth in revenue & 29% growth in bottom line.
  • Maximized utilization of the facilities resulted in higher earnings.
  • To share the advantages of continuous development and maintain a focus on value creation for all stakeholders, the board recommended a dividend of Rs. 5.5 per share in FY2021, equal to 275% of face value. This includes a 50% special dividend to commemorate the company's 50th anniversary.
  • The company has attained the status of ‘debt free company’ on a standalone basis & has surplus funds of Rs. 125 crores for FY21.
  • On a consolidated basis, the company has net debt-equity ratio of 0.15 which is very healthy.
  • ICRA Limited and CRISIL both raised DNL's long-term bank facility ratings from ICRA AA- to ICRA AA and CRISIL AA- to CRISIL AA, reflecting the robustness of its financial condition.
  • Company has 1st major Phenol plant in India supplying at the rate of 130% to the market & even exporting the product when domestic demands are met.
  • A new site has been acquired at Dahej for capacity enhancement and its development is almost complete.
  • For FY21, company has either maintained or gained market share in respect of all its key products.
  • Company has good & strong relationships with its suppliers & customers along with medium- & long-term contracts with customers to ensure the continuity of deliverables.
  • Company is of the view that it could lead the movement in Indian Chemical Industry, thus, becoming a global player.
  • Deepak Nitrite is appealing to its clients because, for one thing, they have a wide range of technological abilities that they handle efficiently and responsibly in an environmentally sustainable manner.
  • Overall business i.e., including all segments have grown by 8%-9%.

Financial performance highlights

For Q4FY21:

  • Revenue for Q4FY21 was recorded at Rs. 1469 crores rising by 39% YoY & by 19% QoQ.
  • Increase in revenue is the result of increase in demand for phenolics business in the end-user industries. Basic chemicals and fine & specialty chemicals, both of which saw volume increases, also contributed to revenue increase.
  • EBITDA was recorded at Rs. 461 crores (31% margin) in Q4FY21, higher by 75% YoY & by 36% QoQ.
  • As a result of a favourable pricing scenario, increased plant productivity, and increased operational leverage, the EBITDA margin grew to 31%.
  • For Q4, PBT was recorded at Rs. 390 crores, higher by 94% YoY due to strong results in the BC, F&S and phenolic businesses and lower interest rates as a result of substantial debt reduction in the last year.
  • For Q4, PAT was recorded at Rs. 290 crores, higher by 68% YoY due to revenue growth and better operational & financial efficiency.
  • EBIT expanded by 319% YoY recording a margin of 28% while it was 12% in Q4FY20.
  • As compared to last year, phenol & acetone’s revenue increased due to increased demand.
  • Solid recovery in the quarter through volume gains across products.

For Full FY21:

  • On Reducing power cost front, company is achieving operational efficiency by operating at 115% to 120% continuously, thus reducing cost by increasing volumes.
  • Company has efficient supply chain management aided by software modelling, GPS tracking, analysis of different opportunities for procuring raw materials, etc.
  • Capex for FY21 was around Rs. 150 crores to Rs. 200 crores for Brownfield expansion & around Rs. 100-150 crores for Phenolics business.

Segment-wise highlights

  • As a result of a significant turnaround in key end-user sectors, the basic chemical segment rose by 9% from Rs. 226 crores in Q4FY20 to Rs. 245 crores in Q4FY21, fueled by high volume growth. EBIT increased by 27% to Rs. 71 Crores with an EBIT margin of 29%.
  • Increase in raw material prices was passed on to the customers.
  • The Fine & Specialty segment saw a 30% increase in sales to Rs. 206 crores in Q4FY21 from Rs. 158 crores in Q4FY20, with a 15% increase in volume. EBIT improved by 58% to Rs. 80 Crores with EBIT margin of 39%.
  • The performance product category reported decreased revenues in Q4 due to the impact of DASDA pricing, which was unusually high in the base year and is currently extremely low. However, high demand has resulted in a 12% QoQ  increase in segment volume.
  • Phenolics business witnessed revenue growth of 77% to Rs. 938 crores in Q4FY21.

Industry outlook

  • During FY21, there was surge in the demand for agro-chemicals, dye intermediates, intermediates for paper segment & company is foreseeing more opportunity in exports rather than local demand.
  • China & US are facing problems in phenol supply; hence, company has an advantage as a local player.
  • Adding to this, India’s Pharma sector is growing helping to grow demand in chemical sector domestically.

Future Prospects

  • Growth trajectory across all SBU is expected to continue aided by capacity increment due to brownfield project & new products (fluorination & photochlorination) out of greenfield project & increased demand from end segments.
  • Company has plans for forward integration of phenol & acetone-based products.
  • Capex for around Rs. 300 crores for new subsidiary are planned for FY22.
  • Company is adding 2 new technologies or chemical platform to its existing platforms, it is going to help the company to produce many newer products.
  • EBITDA margins of the company has already increased significantly but are also expected to grow for next 3 years.
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