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But important thing to note Is that this ROCE is due to DASDA benefit and hence perhaps is abnormal
Product wise too Aarti is more diversified
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It appears that he has been part of deepak nitrite for 3-4 years already.
Status of Mutual Funds holding in Deepak Nitrite share as Follows
End of March 20 : 15.25%
End of June 20 : 12.74%
It means MFs have offloaded around 34.21 lakh shares during the quarter.
The acetone prices were up but now going down from some time. as they don’t have much pricing power, MF believe this will affect Deepak nitrate. that’s why the offloading.
Just for commodities price fluctuation forcing mutual fund offload means they have offload N number of times in a year.AS these commodity prices are fluctuates within year lot. These mutual funds are bought at 100-200 range during QIP time , its natural that after their holding raised 4 fold takes some profit off the table.
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No it is not just a fluctuations, the price started going down since before 2018, see the MF holdings and you will see they are reducing their holdings since then.
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Acetone is a byproduct of Phenol Production. Contribution of DPL in Consolidated profit is around 15% ( PBT level).
Standalone PBT( 706 Cr), Consolidated PBT( 806 Cr) for FY 20.
SA profit for FY 20 has increased by 232% 706 Cr vs 212 Cr.
DNL has made a killing this year in PP section.
So it looks unlikely that falling acetone prices may prompt MFs to offload holdings.
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Very old company I know since 1980…no known corporate governance issue to my knowledge…
In spite of so many ups and downs in chemical industry , this company has been growing consistently over last 10 years …
Took this data from Screener:
Revenue growth over last 10 years CAGR @15%
Net Profit growth over last 10 years CAGR @40%
ROE over last 10 years CAGR @20%
Current stock P/ E is just 14.7
Regular Dividend Payer…
Discl: Invested
5 Likes
According to this report major expansion of phenol capacity in India is already underway.
Report is dated 24-May-19 and a little old but it mentions at least 4 plants already coming-up with huge capacities -
- Deepak Phenolics Dahej Phenol Plant - 0.200 mtpa
- Haldia Petrochemicals Haldia Phenol Plant - 0.200 mtpa
- Nayara Energy Vadinar Phenol Plant - 0.200 mtpa
- GAIL (India) Bharuch Phenol Plant - 0.108 mtpa
The same report says that all these plants will be operational by 2022.
According to this report India’s demand for phenol is 386,000 tons in 2019 increasing at 7% between 2014 and 2019. Assuming same rate of growth in demand, India’s demand for phenol in 2022 will be 473,000 whereas supply of above mentioned plants will be 708,000.
Are we not looking at major oversupply of phenol by 2022?
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Till date , India is a net importer of phenol… so Deepak’s Phenol now is an import substitute…
Yes the new capacities are planned in India… Going by what PM Modi said , whatever we are importing , let us aim to export that product…
So let us look beyond india…
The Global phenol production capacity is 13.85 MT which is fully used up…no new capacities are coming up anywhere except india… But the world market would continue to consume @8-10%…
And to day China is also a heavy consumer of phenol and they are net importer…
So India will export phenol to China …why not ? 
Anyway, coming to Deepak , let us ask this question in any concall that we may have with management… Deepak ji is quite upbeat…they must have definite strategy…
What I see is
(1) They have the early movers advantage.
(2) they have installed their own power plant and steam…will be able deliver low cost products.
(3) They are also planning in to high margin downstream products…
Discl,: Invested… may be biased…but not married to the stock…if market situation changes…will change my view…
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For FY 20, a small comparison of Deepak Nitrite( DNL)( on SA basis) and Deepak Phenolic( DPL ) is as follows:( figures in Rs crores) ( a small approx may be there)( Source AR FY 20)
DNL DPL
Revenue 2237, 1992
Raw material 884.6, 1462.4
Finance Cost 20 , 94.8
PAT 544.1, 67
With such a high Raw Material Cost , can DPL be as profitable ever as DNL??
Can DPL be ever a growth driver for the DNL( on Consolidated basis)??
Solicit Comments on this.
Hi,
As phenol was bottom of down cycle last year and margin was bottom last year , and once cycle turns the margin imprice from here. and as per mgmt this segment will clock 15% ebitda margin . And once the forward integration starts they can add more ebitda margin. Most of phenol derivities are still got imported into india,so there is enough opportunities are there in front of mgmt do margin accretive front.
Regards,
Sathish
4 Likes
Deepak nitrite seems to be an intersting story…DPL was commissioned as a part of PM Modi’s Make in India program…
(1) It has backward integration to make cumene required to make phenol…
(2) Forward integrated to make high margin value added product .
(3) it already has Export foot print in several countries…it already earns 45% from export revenues…
(4) Mr Deepak Mehta has rich experience of running his business for last 40 years…and high conviction about his Business…
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Mkp Cap : 45 Lakhs in 1972 to 7000 crores in 2020. No other proof required for management capabilities
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From article:
The US-based asset management company acquired 9,25,451 shares through SSGA Funds Management in Deepak Nitrite (representing 0.67 percent of its total paid-up equity capital) at Rs 632.36 per share, bulk deals data available on the National Stocks Exchange (NSE) showed.
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Pretty bad set of numbers by the company. Any idea why performance chemicals have reduced drastically?
Kanv,
It’s because of Base effect, as last year dada price was around 11 to 12 usd and due to demand destruction on key user industries which is textile,paper is subdued (due to pandemic). The 12$ usd was unsustainable level so it came down to 4$ March onwards. This with 1 month plant shutdown if you consider the result is not such pathetic one.
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Ipa capacity going to increase from 30k ton to 60k ton one way good , in the view of more acetone get consumed internally. But Deepak fertilizer also increasing capacity and Deepak Nitrite also increasing, then once this Sanitizer based demand slow down after pandemic then it will be concern for me