I dont know abt question 1.
regarding q2. more buying needs more capex. basically more expense. if they have inventory worth 3 month demand, then if they buy more, it will be more inventory on top of existing 3 month inventory.
what if demend reduces in near future, then they will be holding inventory which has no demand. there will be more warehousing cost, holding cost. cost of secruity, safety etc. so company never buys more than its required, more capital will be stuck with inventory.
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After the successful integration of the MIBK capacity, what should be its contribution of it to total rev ?
Why a separate entity âŚseems to be in similar activity and segment ⌠is it conflict of interestâŚ
Q4FY22-23 RESULTS
CONFERENCE CALL
TRANSCRIPT
PRESENTATION
FINANCIALS
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Deepak Nitrite Capex Update:
1.BTC /BTF plant is expected to be commissioned in Q3 FY24,
Letâs Understand the products.
BTC is Bis(trichloromethyl) Carbonate. It is also known as Triphosgene. It will be synthesized through the photochlorination of phosgene.
BTF is Benzo trifluoride. It is also known as Trifluoro toluene. It can be synthesized via fluorination of toluene using a fluorinating agent such as HF, FD4 etc.
These two product will be related to agrochemical & used as captive consumption also
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Acid plant is expected to be commissioned in Q4, FY24
This is basically Spent Sulfuric Acid Concentration (SAC), used for captive consumtion. -
MIBK (40KT) & MIBC (8KT) will be commissioned in Q1 FY25. These are derivative products of Acetone,
Will be catering to Domestic demand, aiming for 100% market share, currently 100% is imported.
MIBC is forward integration of MIBK -
Poly carbonate compounding will be commissioned next 18 months. This is actually forward integration phenolics.
It has application in 5G, electronics, EVs and medical devices also.
Starting with 35k capacity for phase-1 but aim will be to reach world scale capacity. -
Debottlenecking of Phenol facility (10%); Q1
Advance process control (APC) by Q2,FY24. It will improve quality & efficiency
Base capacity of phenol plant was 200kT,
Going for 50% expansion, 300KT capacity (within 4 quarters)
They are going from 200k to 300k capacity by spending less than 100cr. Phenomenal incremental Asset turn.
Management keeps saying 120% capacity utilization which means 240k run rate. But they already did debottlenecking at current capacity is already 250k. So, I wonât consider this as 120% utilization. Process Throughput in winter season is generally high where chilling unit is required.
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During Q4, FY24 to Q1, FY25 they will commission
a. Expanded Hydrogenation
b. Multipurpose distillation
c. Multipurpose Nitration -
They also do have plan to build Sodium Nitrate capacity at Oman which should be completed in 24-30 months.
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BTC is benzotrichloride synthesised by photo chlorination of Toluene
It is starting material for making BTF benzotrifluoride
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Yes, you are right.
BTC is Benzotrichloride and BTF is forawrd integration of BTC by dehydrochlorination.
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Can they maintain the same process output in the summer season also using more chillers or process cooler fans?
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The process is run at the set parameter for which there is utility section which maintains a constant temperature hence one should not expect a change in throughput coming from the plant
Few other updates from con call:
- Management is planning to double its revenue over the next four years.
- DPL has pre paid the term loan of 161Cr in FY23. This has reduced the net debt to equity ratio to almost zero, that is 0.03 as compared to last yearâs 0.20.
- Margin profile will be similar after all the expansion in comparison with normal year, FY23 was little bit suboptimal. Didnât give any number.
- Phenolics has investment in downstream and those investments will have margin profile which are similar to Deepak Nitrite standalone and hence between then will help to elevate the margin profile of phenolics business to something which is somewhere between its current profile and Deepak Nitrite.
- Cash flows remains robust and we have reported operating cash flow of Rs.650 crore in FY2023. When evaluated againstEBITDA our OCF/EBITDA ratio has been 0.49.
- update on the fire incident on Nandesari facility that occurred on 2nd June 2022. Received an interim payment of Rs.11 crore in March 2023 and further Rs.14 crore in April 2023 as an interim payment, hope to receive the balance in the coming quarter.
Sanjay Upadhyay was annoyed when pressed about Phenol pricing.
Please add if any other important updates are missed. Thanks.
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Just for 3% upside target price, who will invest in Deepak nitrate? What exactly these guys achieve by cracking such jokes?
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The above article is for trading, not investment.
Though doesnât makes much sense either ways
With all these projects, capacity expansion as well as addition of upstream and downstream products, how much topline is expected to grow?. They are saying , they will double the revenue in 4-5 years, but is it after doing all these projects?
Also what about operating margins? Will they increase with these projects?
During FY 20, Fy 21 and FY 22, margin was around 25% while FY 23 it is reduced to 16%. Earlier period during FY 16, FY 17, FY 18, margin used to be 12%. Management said in concall high margin was due to DASDA, but that can be for one-off year, it cant be for 3 years sequentiallyâŚwhy margins are going back to FY 17 period? And will it really improve with all these projects? And what is the upside expected in price if revenue really doubles in next 4 years???
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During 2-3 qtr back concal , Sanjay ji and maulik ji said it will be around 20-22% and assets turnover will be around 1.75-2 times.
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DASDA was a factor in FY20
In FY21 and FY22, company started producing IPA which is used to make sanitizers. IPA is made from acetone for which the company had a plant which was commissioned just in the nick of time around FY19-FY20. The business is related to the phenols segment (Phenol and Acetone) which normally has commodity chemical margins but due to the pandemic, sanitizer was in high demand which led to abnormal realizations for IPA. Refer quotes from fellow VPers below
As the pandemic subsides, the phenolics business which is now ~60% of revenues will revert to the mean commodity chemical margins. From what I remember, the phenolics business is in a subsidiary while majority of the remaining businesses are held directly in the listed entity. So a quick subtraction from consolidated - standalone financials will give you a sense of how the phenolics business margins have fared over the last 3 years
Also note chemical companies across India had a dream run during the COVID years as prices shot up due to supply disruptions leading to extraordinary/abnormal margins. What we are witnessing now is only a reversion to the normal. The extra cash flows generated during these 3 years have helped some of the small / mid size players move into the next orbit and given them a war chest which they are now utilizing to get into larger projects and punching above their weight.
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India is expected to become a USD 850â1000 billion chemicals market by 2040, taking 10-12% share of the global chemicals market
From the annual report of FY22â23
- A dominant player in basic intermediate sodium nitrate /nitrite ( share 70% )
- Deepak Phenolics commands over 56% of the market share for Phenol, acetone, and IPA.
- Have announced investment aggregating to âš 2,500 Crores for expanding capacity
- we have planned brownfield projects for certain key products
- Greenfield expansion in Polycarbonate compounding (applications: 5G boxes, EV batteries, medical devices)
- Backward integration for photochlorination (Q3) and fluorination
- Forward integration of acetone for MIBK and MIBC
- Investment of up to 51% of the equity share capital of Deepak Oman Industries FZC LLC to set up a facility in Oman to manufacture key chemicals and benefit from low-cost inputs of raw materials and energy to serve global markets
- Implementation of photochlorination and chlorination project in the third quarter
- Acid project in the fourth quarter
- By the first quarter of FY 2024â25, anticipate the commissioning of our MIBK and MIBC plants.
- Hydrogenation and multipurpose distillation facility signify further progress in expansion endeavours
- New capacities of Phenol came on stream in China, and downstream BisPhenol-A and Polycarbonates lost their luster. A continuous bear phase in Phenol caused chain margins to shed nearly 25% from the previous year
- DPL conducted trials of using biofuels in its boilers to reduce its usage of fossil fuels, and it is planned to further scale it up during FY 2023â24.
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Global chemical trend
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