Hi Devang,
This 840cr repayment going to be bullet payment start from 2020 onwards. Till that time I hope only interest outgo only be there. So till that time they can get good cash flow to start repay after 2020,and as per mgmt they need only another 200cr for CapEx if they do derivatives of phenol that too after I hope 2020 only.
What about the prices of Acetone and phenol, though the prices are rising but I am not able to factor out Saudi arabia expansion and what if the shell starts producing again?
According to a latest market study report, China and SEA & the rest of APAC are dominating regions in the sodium nitrate market, due to growing population and increasing demand for sodium nitrate applications across a diverse range of industries. North America and Europe are the next most important regional markets for sodium nitrate and Germany, France and the U.K. are key countries in the European region. The sodium nitrate market in Asia is expected to be the most promising market for players during the forecast period, owing to various factors such as developing healthcare facilities, growing chemicals, plastic & rubber and paint & coating industries and the increasing use of sodium nitrate in pharmaceutical & healthcare industries.
India itself is a big consumer of phenol and don’t forget that we have no manufacturers in India and this will be one of the biggest phenol plants.
We already have anti dumping in place and the company had started seeding the market before the factory was about to start.
Yes there is always a risk in cyclical markets regarding the demand and supply side but this may not be true for phenol as the demand is also growing for it worldwide.
Hi,
Deepak nitrite delivered another good quarter result. Core business seems doing very well with
Ebitda margin expanded by 80bps (mgmt guided 100bps increase every year for next few years)
Performance product division turn PAT positive finally
Qoq sales is flattish, waiting for mgmt commentary for same (whether any shutdown happened during quarter or subdued realisation) caused this
Revenue at Rs. 433.0 crore Vs. Rs. 356.2 crore in Q2 FY18, up by 22% EBITDA at Rs. 68.9 crore Vs. Rs. 53.8 crore in Q2 FY18, growth of 28% PAT at Rs. 28.1 crore Vs. Rs. 22.7 crore in Q2 FY18, higher by 23.7%
Domestic revenues stood at Rs. 275.02 crore in Q2 FY19 vs Rs. 208.8 crore Q2 FY2018 higher by 32%
Exports came in at Rs. 151.9 crore in Q2 FY19 vs Rs. 141.6 crore in Q2 FY18, higher by 7%
BC segment stood at Rs. 201.7 crore in Q2 FY19 vs Rs. 170.0 crore in Q2 FY18, growing by 19% Y-o-Y
FSC segment were Rs. 143.8 crore in Q2 FY19 vs Rs. 112.9 crore in Q2 FY18 up by 27% Y-o-Y.
PP segment revenues were Rs. 96.8 crore in Q2 FY19 vs Rs. 84.2 crore in Q2 FY18, up 15% Y-o-Y.
Greenfield Project of Phenol & Acetone:
Trial runs for phenol and acetone have delivered successful and encouraging results. The company expects to achieve regular production status in the very near future
Revenue grew by 22 % to 433 Cr compare to 356 Cr same period last year.
EBITDA grew by 28 % to 69 Cr compare to 54 Cr same period last year.
EBITDA margin improve by 80 basis point to 15.9 % compare to 15.1 % same period last year.
Operating EBITDA excluding insurance grew by 22 % to 62.2 Cr same period last year
PBT grew by 48 % to 44 Cr compare to 30 Cr same period last year.
PAT grew by 24 % to 28.1 Cr compare to 23 Cr same period last year.
Depreciation stood at 13 Cr for the quarter
Finance cost increase to 12 Cr for the quarter
Total debt stood at 470 Cr for the quarter
Debt to equity ratio stood at 0.48 for the quarter
Segmental Performance
Basic Chemicals
Revenue grew by 19 % to 202 Cr compare to same quarter last year.
BC segment contribute 45 % to total revenue
EBIT margin stood at 17.9 % for the quarter
Fine and Specialty Chemicals
Revenue grew by 37 % to 144 Cr compare to 117 Cr same quarter last year
This segment contribute 33 % to total revenue
EBIT margin stood at 9 % for the quarter
Performance Segment
Revenue grew by 15 % to 97 Cr from 84 Cr same quarter last year.
This segment contributed 17 % to the total revenues
EBIT margin strongly improve to 14.6 %.
Revenue mix
Domestic Revenue grew by 32 % to 275 Cr against 209 Cr Q2 FY18
Export revenue grew by 7 % to 152 Cr compare to Q2 FY18.
Key Highlights
Commence operation of Phenol and Acid tone at Mega Plant at Dahej.
International Trade war has impacted both demand and supply in several industries and the prices of crude oil for some petrochemicals have also started to firm up . There was also significant fluctuation in currency in the current quarter.
International Players are completely depended on Indian company as a favored supply chain partner. India own establish consumption is also growing which is creating opportunities for companies. Macroeconomic regulation in China in terms of supply disruption are added advantage for achieving better volume and better realizations.
Company has substantially reduce borrowing in foreign currency to mitigate adverse impact of foreign currency movement.
By commissioning of new plant of Acid tone and phenol company will save import of 400 million $ for the country.
Segmental Highlights
Bulk Chemical segment register 19 % growth owing to capacity augmentation which resulted into higher volume with margin products and strong realization gains.
Fine and specialty reported 27 % growth supported by demand attraction.
Performance Product grew by 15 % in the quarter compare to last year same quarter. Company focus on this segment to turnaround has yielded positive EBIT. Company is widening customer base and entering new geographies which will strengthen company performance.
Basic chemical continue to drive demand momentum in key products which was complimented by strong growth in the Fine and specialty chemical segment.
Q&A
What is total Debt on consolidated Basis ?
Company is announcing project of 1400 Cr and that will be debt to equity of 60:40. So 470 Cr on Deepak Nitrite and 840 Cr of term loan on Phenolic and 350-400 Cr of working capital . So that will be the total debt .
What percentage of loan is in foreign currency ?
150-170 Cr
How long it will take to full utilization as the marketing efforts were started earlier for the new phenol plant ?
Company will reach 75-80 % this year and 85-90 % in next year. Market is waiting for our production and there is very positive response. Company have large orders in hand.
What is the current demand and growth rate for Acid tone and how it will pan out for the company ?
Demand is very good in acid tone. Company don’t have any concern on selling of acid tone.
What is the sustainable margins for the performance chemicals ?
In second half PBT will be neutral or little bit positive.
Last year company had done 180 Cr of turnover this year company is doing 230-240 Cr of turnover in optical basic chemical segment and next year company is going toward 290-293 Cr of turnover. Margins are good and company is very positive for this particular segment.
Do company have proper propylene tie ups for the next two years ?
Yes
Is acid tone is not easy to sell ?
There is demand and company received good response from acid tone. Company have also reached the grade of Pharma. 60 % of acid tone demand is from pharma space and which is very specification focus. Acid tone imports are also more than company acid tone production which is 60 % of phenol production therefore company do not see any issue in acid tone.
Is there any plan for downstream phenol derivative ?
Company have plan for the downstream product once the cash flow start coming from the phenol plant company will announce soon. In next one-two cost announcement will be there.
What will be the trend of input cost going forward as there is some pressure in input cost realization ?
The prices of raw material are going up but at the same time the prices of end products are going up. Company performance is well and margins are improving.
What could be the additional increase in the depreciation and interest cost on consolidated basis because of commissioning of plant ?
Overall consolidated level Deepak Nitrite will be 100 Cr depreciation and interest combined. Phenolic will be in range of 275 Cr at consolidated level with depreciation and interest put together.
Is the OBA happen in the quarter is sustainable ?
Last year company had 180 Cr turnover in this optical Binding segment This year it should be around 230 Cr. Next year FY20 company will achieve 290-300 Cr Company had PBT positive from august onwards and the sustainability shall be further enhance in coming month.
In segmental performance the share of other un allocable expense gone up substantially it was 12 Cr in Q2 last year and this year it is 32 Cr in current quarter. Why so much sudden expansion ?
Because company hedge the currency so there is a gain on revenue and loss in the borrowing and imports that company done. So net impact is shown on the un-allocable side. There is no loss on the foreign currency.
In next quarter when company will book this hedging so does PAT will be higher in coming quarter ?
Yes . Loans are restated now as on 31st September and it remains at this level than the revenue realization will be better. So there will be positive impact.
How do the china market panning out in term of phenol because demand is quite high there and they are facing problem in importing and also they have a 10 % duty from US coming up on the tariff so does that act as a great lever for prices firming up ?
That impact is already seen in the market and china is self-sufficient for phenol. Phenol prices has significantly grown in last couple of month . So there is a positive trend and this will continue in near future.
How was the response of the initial marketing that company had done in September ?
Company has started marketing from last 1.5 year to understand the customer requirement to understand the logistics requirement because it is a bulk chemical so company have to appoint distributor , appoint dealer so there are many things in field marketing. It has worked fairly good for the company . Now benefit is company will take the utilization to 75-80 % in next 5 months only. So company is confident of selling also.
What are the current crack spread in the international markets ?
830 to 850
What was the trigger for performance products ?
Operational efficiency have improved , change strategy of selling product at lower margin. Customer response to new products has also developed. So it is a multichannel approach.
What are the updates on fine and specialty chemical segment ?
In the first half company have done reasonably well and this will continue in second half also and company had a setback last year because of fire. Company have expanded capacity in one-two products. Rupee depreciation also helps as these are largely exports.
Does company is gaining from supply shortage by China in agro chemical segment ?
Yes and with anticipation to China problem some demand will shifted to India. So company have plan for further de-bottlenecking and for major expansion also. It will sustainable in next 1-2 years.
Company have also planned for cost reduction in terms of raw material with backward integration in one of company major products and that particular project has been successfully achieved.
What is the opportunity size in OPA and does company is competitive to international players ? What impact can been seen with rupee depreciation ?
Yes company is competitive . Company have launch one-two new products also and that is why there is a turnaround. OPA looks very positive now.
Rupee depreciation will always benefit company as company is a net exporter. In crude also company is able to pass on so there will be no impact of Crude price fluctuation.
Company is focusing on margins in this business with value added products and company is operating at 50 % capacity utilization and same will be there for next year.
Main competitors are Americans , Europeans , Taiwan’s , Indonesian . Indians are competitors.
OPA contribute 35 – 40 % in total exports.
What grade of phenol company is producing currently and which are the consuming industries for the same ?
Company is supplying to all grades.
Does company has started molten phenol also ?
Yes
What is company revenue and margin guidance on consolidated basis and Debt levels ?
Company is maintaining 20-25 % CAGR at PBT level. Deepak Phenolic will operate at 75-80 %.
What Debtors Days Creditors Days and Inventory days expected for the Deepak Phenolic ?
50 Days Debtors and 25-30 Days Creditors. 10-15 Inventory Days
How is Daasda Performing in performance products and is it sustainable ?
It is doing very well. In fact company is running out of capacity in Daasda.
Daasda market is also sustainable.
Does Ralidine , Cumidine and auxine are premium products or performance products ?
Lying somewhere between both.
Does company have also started production of cumin ?
