Deepak Nitrite Limited

CMP = 213

Deepak Nitrite is a leading manufacturer of organic, inorganic, fine and speciality chemicals with more than hundred products across three broad categories. It caters to Colorants, Petrochemicals, Agrochemicals, Rubber, Pharmaceuticals, Paper, Textile, Detergents, Fine & Specialty Chemicals etc. Company  have five manufacturing facilities at Nandesari and Dahej in Gujarat, Roha and Taloja in Maharashtra, and at Hyderabad in Andhra Pradesh. Fully integrated infrastructure equipped to manage a product right from design to despatch lends Deepak Nitrite a strong competitive advantage, company produces complete value chains, right from feedstock to finished product within the organisation.

Deepak Nitrite is adopting the principles of responsible chemistry and stands among 18 Indian companies to be accredited with Responsible Care certification - towards global environment, safety and health management.

Deepak Nitrite currently operates its businesses with three main SBUs namely Basic Chemicals,  Performance Product segment and Fine & speciality chemicals

Investment Rationale

Deepak Nitrite is setting up country’s largest phenol-acetone project at Petroleum, Chemicals and Petrochemicals Investment Region (PCPIR) in Dahej, Gujarat. This greenfield mega expansion project is under construction since last 3 years and costing ₹1,400-crore  through its wholly owned subsidiary Deepak Phenolics. The project is very near to completion of final stage and expected to start the commercial production within next 2 -3 months.

Below video link is helpful to understand the huge potential of this mega project.

https://www.youtube.com/watch?v=4q5PmUSVMFs

The phenol-acetone project will achieve 70% capacity utilization by next year (FY18-19) and 85-90% by FY19-20 to generate around 4500 crores annual revenue from new plant.

Below guidelines are given by company’s Promoter and Chairman & Managing Director Deepak Mehta stated that the company will explore more downstream products from phenol.

“We are setting up the country’s largest phenol-acetone plant at Dahej PCPIR with capacity of about 200,000 tonnes per annum. Once this project is commissioned, it will trigger a lot of new opportunities for Deepak.

“We are also looking to explore more downstream products from phenol. We have set an ambitious target of $1 billion turnover in the next three to four years," Mehta told BusinessLine.

http://www.thehindubusinessline.com/companies/deepak-nitrite-eyes-1-b-revenues-in-3-years/article9869314.ece

Company is sourcing best  phenol plant technology from Kellog Brown & Root International and technology for curmene is has been sourced from UOP Honeywell. EPC work for the plant has been done by Thyssenkrupp. It will be one of the best cost effective and efficient plant in the world. Company has added the cumene capacity which is feedstock for manufacturing phenol and acetone. It will further help to improve the profit margins.

India is importing 80% of Phenols and Acetone from other countries to meet the overall demand and Deepak Nitrite is building the plant to meet at least 60% of overall demand. Phenol demand  is expected to remain strong for longer period and entire capacity of Deepak Nitrate will get absorbed in domestic market.  

http://vibrantgujarat.com/writereaddata/images/pdf/project-profiles/Manufacturing-of-Phenol-Acetone.pdf

Phenol is used in the manufacture of a large range of commercial products. It is consumed in laminates, automobile, foundry, paints, rubber, surfactants, pharma, agro-chemicals, infrastructure products, epoxy resins, polycarbonates, phenolic resins industry etc. Acetone is predominantly used in the production of pharmaceuticals, paints, adhesives and thinners, etc. Thus both phenol and acetone have very wide range of application in almost every industry and it is giving clear visibility for very long term revenue generation for the company.

Deepak Nitrite has market leadership position in most of its products like Xylidines, Cumidines, Oximes, Colour Intermediates, Sodium Nitrite, Nitrate & Nitro Toluenes in the India and among top 3 global supplier for Cumidines and Oximes

Deepak Nitrite has  increased its focus on adding high value products catering to pharma, rubber, colourants and imaging products, paper products and other industries. Moving higher in the value chain to improve its profitability in long term.

Diversified product portfolio  gives stability and strength because it covers several industries  like Colorants, Petrochemicals, Agrochemicals, Rubber, Pharmaceuticals, Paper, Textile, Detergents, Fine & Specialty Chemicals.

Over the years company has built enduring relationships with leading global companies with strong distribution network across the globe with footprints in over 30 countries. 

Its strong R&D focus has led to in-house development of new product applications and understanding customer preferences resulting in having strong customer base consisting of some of the largest chemical companies in the world, including BASF, Syngenta Global, Bayer Cropscience, HMEL, Monsanto, Clariant, SF chem, Lonza, IOC, Reliance,  Essar, EASTMAN, saltigo etc.

Conclusion 

Deepak Nitrate is growing at decent pace with existing product portfolio and generating  revenue around 1500 crore and profit more than 100 crores. But upcoming phenol and acetone mega plant is going to bring huge turnaround  in topline and  bottom line in coming quarters. 

Company is continuously maintaining its market leadership position in several products and now further addition of phenol and acetone. It is because of exceptional foreseeing ability of management to capture the opportunities for those chemicals where stable demand and supply gaps exist for longer period and scope of  adding high value products.

Deepak Nitrate stock at cmp Rs 213 is very good  investment opportunity for short term and long term ( 1 year - 4 years). It can be bought + / - 10% from cmp with 10 -20% of portfolio allocation.