Profit before tax (PBT) soared 972.10% to Rs 167.24 crore in Q1 June 2020 as against Rs 15.60 crore in Q1 June 2019. Current tax expense for the quarter surged 678.10% at Rs 29.18 crore as against Rs 3.75 crore in Q1 June 2019. The result was declared during trading hours yesterday, 31 July 2020.
Operating EBITDA surged 126.66% to Rs 272 crore in Q1 FY21 as against Rs 120 crore in Q1 FY20. Margins improved to 19.7% in Q1 FY21 as against 10.7% in Q1 FY20. Other expenses reduced by Rs 26.90 crore during the quarter on comparison Q1 June 2019. The company's efforts to optimise the fixed costs also showed some positive results.
Most of the products of Deepak Fertilisers & Petrochemicals Corporation come under the ambit of essential commodities. The company continued its operations with some intermittent disruptions during the period of lockdown. Overall, there has been no major impact on overall business and its profitability, as per the fertilizer manufacturer's regulatory filing.
Segment profit for fertiliser vertical expanded to Rs 43.40 crore in Q1 FY21 from a loss of Rs 9.7 crore in Q1 FY20. Sales volumes of bulk fertilisers (NP + NPK) during the quarter Q1 June 2020 grew by 51% Y-o-Y (year-on-year). Margins also improved significantly on account of higher Smartek in product mix with higher NSPs.
Segment profit for chemical segment increased substantially by 83% Y-o-Y to Rs 229 crore in Q1 FY21 as against Rs 125 crore in Q1 FY20. Acids volumes declined by 30% Y-o-Y and TAN volumes fell 17% Y-o-Y. Major raw materials prices declined compared to Q1 FY20.
Sales volumes of IPA (isopropyl alcohol), which is used in hand sanitizer, increased 49% Y-o-Y. IPA revenues increased by 178% y-o-y to Rs 196 crore in Q1 FY21. Improved margins were driven by an unprecedented surge in IPA demand on the back of the increased awareness of use of IPA in hand sanitizer & disinfectant along with increase in International IPA prices.
New differentiated Bentonite Sulphur variant Bensulf Super-fast was launched by the company during Q1 FY21 along with IPA-based hand sanitizers under the brand name 'CORORID', which conformed to WHO's recommended formulation in April 2020.
Speaking on the Q1 performance, Sailesh C. Mehta, the chairman & managing director (MD) of Deepak Fertilisers & Petrochemicals Corporation, stated: COVID-19 pandemic has severely impacted India's economy in the recent months although limited impact has been witnessed by the agrochemical industry. Good rabi harvest and normal monsoon augurs well for the Kharif season. Sowing for key crops such as cotton and soybean improved significantly compared to the last year. Extensive farmer and channel connect through digital ATL / BTL initiatives undertaken during restricted movement conditions. We launched differentiated Bentonite Sulphur with enhanced efficiency under brand name 'SUPER FAST' and have also moved almost 100% NPK volumes to differentiated grade Smartek in Q1. Our CNB business reported third consecutive profitable quarter in a row.
IPA demand was encouraging on the back of the continued demand from Pharma sector and additional demand from Hand Sanitiser segment. Nitric Acid and TAN products did face some challenges due to COVID-19. TAN experienced volume loss on account of decline in demand across segments of Private Coal, Non-Coal Mining, Infrastructure & Explosive Manufacturers. Recent strategic reforms by the Central Government to support agriculture sector and the mining sector are indeed path breaking. This should undoubtedly support the Indian economy in the long term. The Company is expecting good Kharif season and accordingly, enhancing its production efficiencies in anticipation to meet the customer requirement. Planned infrastructure projects, coupled with the positive mining industry outlook, provides an attractive backdrop for TAN products, he added.
On the technical front, the stock's RSI (relative strength index) stood at 78.684 as on Friday, 31 July 2020. The RSI oscillates between zero and 100. Traditionally, the RSI is considered overbought when above 70 and oversold when below 30.
On Friday, the stock was trading above its 50-day moving average (DMA) placed at 116.94 and its 200-day moving average (DMA) placed at 100.67.
Deepak Fertilisers and Petrochemicals Corporation is a manufacturer of fertilizers and chemicals. The stock soared 9.73% to end at Rs 159.60 on BSE on Friday. The scrip hovered in the range of Rs 141.95 to Rs 164.85 on that day.
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