Deepak Nitrite Q2 Results Review - Contraction In Phenol Margin, But Recovery Expected: Motilal Oswal
The Ebit margin in Phenolics stood at 8% (the lowest since Q4 FY20), with Ebit at Rs 1 billion.
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Deepak Nitrite Ltd. reported a miss on our estimate. Ebitda came in 9% lower than our estimate at Rs 2.7 billion, while Ebitda margin – at 13.8% – was also below our estimate of 16.3%, the lowest since Q1 FY19.
The miss was largely due to the phenolic segment. Ebit margin contracted to 8% in Deepak Phenolics, the lowest since Q4 FY20.
Management announced that it has commissioned a project (for an agrochemical product) in October 2022 for which the entire volumes are tied up for the next five years – it expects another project to be commissioned in Nov-22, which would be margin accretive.
A product for the European market (developed in-house) was also launched and Deepak Nitrite is only the second manufacturer of the same globally. This would be replacing a product recently banned for being carcinogenic.
The performance of Deepak Nitrite was also adversely affected by the fire incident in its Nandesari site but the plant is running at full capacity since Oct-22.
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