Thread by @SkCapitalist

#DeepakNitrite manufactures Basic #Chemicals, Fine & Speciality Chemicals and Performance Products.
Major products of the company are #Phenol #Acetone #Cumene #DASDA #Inorganic Salts #Xylidines #Toluidines

#Revenue Mix and #Location details as below:
Company’s turnover entails from the Domestic Revenues which stood at 58% of Total Revenues and the rest 42% came from Exports

Recently company has started commercial production of #Isopropyl Alcohol #IPA.
Isopropyl alcohol is mixed with water for use as a rubbing-alcohol antiseptic. It is also used in aftershave lotions, hand lotions, and other cosmetics.

In industry it is used as an inexpensive solvent for cosmetics, drugs, shellacs, and gums, as well as for denaturing ethanol (#ethyl #alcohol).
Massive uses of IPA, which can be found here en.wikipedia.org/wiki/Isopropyl…

It has robust mfg model with full backward integration and its multi-year relationships with leading global customers in over 30 countries
#Deepak Phenolics Ltd ended FY20, it 1st year of operations, with #phenol prod. vol. just short of 2 lac tons or 100% capacity utilization.

#DPL commenced commercial production of Isopropyl Alcohol (‘IPA’) at its manufacturing facility situated at #Dahej, Gujarat effective April 21, 2020. This facility has capacity to manufacture 30,000 MT of #IPA annually.

The Co. has stated it plans to develop capacities to produce value added derivatives of phenol and acetone through forward integration. The launch of capacity to mfg IPA is the first step towards achieving the vision of developing a comprehensive basket of downstream derivatives.

Deepak Nitrite’s manufacturing facilities are located at Nandesari and Dahej in #Gujarat, Roha and Taloja in #Maharashtra, and Hyderabad in #Telangana

Some of the #customers of DNL are as below:

Moving ahead India’s #chemical industry is set for sustained #growth receiving impetus with capital investment and affirmative Government policies. DNL has been a consistent #performer on all parameters

DNL achieved a key milestone by substituting majority of the local market imports of Phenol and Acetone, and reportedly attaining a market share of about 65% in the country, it has also been successful in producing and selling pharma grade Acetone.

Rating agency ICRA believes DNL has increased mkt share & are leaders in most of their segments (Domestic mkt as well as global), however realisations will go down next year post normalisation of supply chains throughout the world.

The company has saved itself from raw material price fluctuations through formula-linked price contracts for some of their products.

Strengths of DNL :
Long operating history and established track record in the global chemical intermediates industry
Diversified product profile mitigating risk associated with cyclicality in different product segments - Currently, it has a product portfolio of over 100 products

Multi-purpose manufacturing facility, with significant backward and forward integration linkages
Improvement in financial profile driven by turnaround of performance products
Healthy ramp-up of operations at DPL; successful commissioning of IPA plant.

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% growth rate.

Close to 15-18% revenues come from DASDA Chemical (Performance products) which has seen exceptional realisations due to supply disruptions, this will reduce going ahead so we can consider reduction in profits and reduced operating margins to 20% (Approx).

Coming to management the current CEO has amazing credentials and he’s very young but has a good experience of 12 years in the company. I was not able to find any management issues or miss management of funds by promotors.

Looking at the #share holding pattern #promoter stake has reduced a bit but I think that’s because of #QIP which was issued where #MF’s & #FII’s have picked up stake.

Amazing #growth ratios. #Cash flow from operating activities has been positive since 2015. D/E of 0.7 and #interest coverage of 7X which are very comfortable liquidity levels.

Stock P/E is currently 13 however I am very sure that #profits will come down a bit in the coming quarters so it’s actually #fairly valued. But there are growth drivers in place so it’s a must have in the portfolio.
Plus #management pays out timely #dividends every year

#Current price is 590 and although it can correct a bit from here but then there is also a #risk of losing the bus, hence it’s better to enter and wait, keep on #averaging as there will be #fluctuations in price.

I personally feel that company has created a very good foundation and with the growth coming in due to macro factors like #govt. initiatives, de-risking of #supply chains and #reduction in #polluting #chemicals factories in #china, this is a very good company to hold on to.

Keep on tracking it and till the point it delivers growth in results keep on holding it.
Please add if i have missed out on any points.
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