Shares of Deepak Fertilisers & Petrochemicals Corporation (DFPCL) surged 14 per cent to Rs 1,092.70 on the BSE in Wednesday’s intra-day trade on a healthy business outlook. The stock had hit a record high of Rs 1,163.75 on October 3, 2024. It has zoomed 118 per cent from its June low of Rs 500.85.
Investor Mukul Mahavir Agrawal purchased 1.5 million equity shares representing 1.2 per cent stake of DFPCL in the July to September 2024 quarter, according to a shareholding pattern filed by the company. Mukul Agrawal held NIL shareholding at the end of June 2024 quarter, the data shows.
DFPCL is among India’s leading manufacturers of industrial chemicals and fertilisers. The group mainly operates in three verticals - industrial chemicals, crop nutrition (fertilizers) and technical ammonium nitrate (mining chemical).
The company has a diversified product range, broadly comprising industrial chemicals (IC), technical ammonium nitrate (TAN) and complex fertilisers. DFPCL holds a market leadership position in TAN and key IC products such as nitric acid, isopropyl alcohol (IPA). Further, commissioning of the ammonia project during fiscal 2024 has led to a healthy backward integration as ammonia is a key raw material for production IC, fertilisers, and TAN.
DFPCL’s operating performance showed an improving trend in the June quarter (Q1FY25), with operating earnings before interest, tax, depreciation, and amortization (EBITDA) improving to Rs 464 crore compared to Rs 281 crore over the same period in the previous fiscal.
In fiscal 2024, the operating performance of DFPCL had moderated due to multiple headwinds across businesses. The consolidated revenue moderated to Rs 8,676 crore in fiscal 2024, from Rs 11,301 crore in fiscal 2023, while EBITDA moderated to Rs 1,409 crore in fiscal 2024, from Rs 2,249 crore in fiscal 2023. The TAN business was impacted by correction in the global fertiliser grade ammonium nitrate (FGAN) prices (index to which TAN is linked) due to dumping from Russia.
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DFPCL in its FY24 annual report said that the industrial chemicals segment margins are expected to be stable and improve gradually with robust demand prospects and stability in key raw material pricing. Additionally, several actions undertaken to grow the specialty chemical portfolio will enable the company to launch new products in the coming year and grow the market share of the products launched already.
Mining chemicals segment recorded healthy growth in FY24 and the trend is expected to continue in FY25. The increasing demand for power is expected to drive coal mining demand, the company said. Additionally, demand for cement, steel and rock aggregates is expected to improve, driven by the government’s spending on infrastructure projects. This will result in increased commercial explosives demand in the mining and infrastructure segments, which will have a positive effect on the demand for all TAN products and create a positive thrust for the specialty (mining solutions) business, it added.
According to Crisil Ratings, over the medium term, the operating margin should sustain at 18-20%, higher than the historical long-term average, aided by benefits from backward integration in ammonia. For the fertliiser segment, rangebound NBS rates, along with stable raw material prices, should lead to a higher margin for the fertiliser segment for fiscal 2025 compared to previous fiscal. For the TAN segment, profitability should improve with lower imports and better realisations.
Going forward, DFPCL will also benefit from the lower-priced natural gas, as per its long-term contract with Equinor, priced favourably than its existing contracts. Overall, uptrend in margin profile will also be driven by long-term strategy of DFPCL to transition from commodity-like products to more specialty products mix, the rating agency said in its rationale.
Meanwhile, the board of directors of the company are scheduled to meet on October 29, 2024 to consider and approve the unaudited financial results of the company for the quarter and six months ended September 30, 2024.