Deepak Nitrite vs. Deepak Fertilisers: A Comparative Analysis

In recent years, specialty chemicals and fertilizer companies have garnered significant attention, reporting substantial profit growth. Among these, the Deepak Group stands out with two prominent stocks: Deepak Nitrite and Deepak Fertilisers & Petrochemicals. In this article, we will explore these two companies, their connections, and the distinctions in their businesses.

Table of Contents

1. Deepak Nitrite vs. Deepak Fertilisers
2. Company Overview
   • Deepak Nitrite
   • Deepak Fertilisers & Petrochemicals Corporation
3. Industry Overview
4. Financials
   • Revenue & Net Profit Growth
   • Profit Margins
   • Return Ratios
   • Debt Analysis
5. Future Plans
   • Future Plans of Deepak Nitrite
   • Future Plans of Deepak Fertilisers
6. Key Metrics
7. Conclusion

Deepak Nitrite vs. Deepak Fertilisers

This comparative study delves into the businesses, operational scales, financial performance, future strategies, and concludes with a summary of Deepak Nitrite vs. Deepak Fertilisers.

Company Overview

Both Deepak Nitrite Ltd. (DNL) and Deepak Fertilisers & Petrochemicals Ltd. (DFPCL) were founded by Chimanlal K. Mehta. DNL was established in 1970, followed by DFPCL nine years later. Presently, Deepak Mehta and Sailesh Mehta, C. K. Mehta’s two sons, manage DNL and DFPCL, respectively.

Deepak Nitrite

Deepak Nitrite Ltd. (DNL) is a rapidly growing Indian chemical intermediary company with over 50 years of legacy. It is the largest manufacturer of sodium nitrite, sodium nitrate, Phenol, and Acetone in India. The company owns six state-of-the-art production facilities, with two under-construction project sites. It boasts a diverse portfolio of more than 30 products used by over 1,000 customers in 46 countries.

DNL’s products serve various industries, including petrochemicals, rubber, agrochemicals, paper, pharmaceuticals, and detergents. Its revenue share in FY23 shows that the AI division and Phenolics division contributed 38% and 62% of the total revenue, respectively. India accounted for 80% of the company’s income, with the rest coming from international customers.

Deepak Fertilisers & Petrochemicals Corporation

Deepak Fertilisers & Petrochemicals Corporation Ltd. (DFPCL) is one of India’s largest chemical and fertilizer companies. It produces industrial chemicals, mining chemicals, and crop nutrition products, including nitric acid, isopropyl alcohol, methanol, and various fertilizers. Recently, the company ventured into the real estate market with a home lifestyle center called Creaticity.

DFPCL’s chemicals find applications in industries such as steel, solar, dyes, explosives, cosmetics, mining, pharmaceuticals, and agriculture. The company owns four production facilities with a total capacity of 3 million MT per annum, with two additional sites for ammonia and ammonium nitrate under construction.

Industry Overview

India’s share in the global chemicals market was 3-3.5% worth $170-180 billion in 2021. It is projected to grow at a CAGR of 9-10% annually, reaching $290-310 billion by 2027 and eventually $850-1,000 billion by 2040, commanding 10-12% of the global market. The specialty chemicals segment is expected to grow the fastest at 11.5% CAGR during 2021-2027. Inorganic and petrochemical sub-sectors are expected to expand at a CAGR of 11% each, while fertilizers are expected to grow at a slower 6% annual rate.

Various factors, including demand shift to emerging economies, consolidation, government support, supply chain diversification, rising per capita consumption, and digitalization, are expected to accelerate India’s chemical industry growth.

Financials

Revenue & Net Profit Growth

Both companies experienced rapid revenue and net profit growth. In FY23, DNL reported a net profit of Rs 852 crore, while DFPCL reported Rs 1,221 crore.

Profit Margins

DNL operates at higher margins due to its specialty chemicals focus, with wider EBITDA and PAT margins than DFPCL.

Return Ratios

Historically, Deepak Nitrite has shown higher profitability than Deepak Fertilisers.

% | DFPCL - RoE | 24% | 17% | 15% | 4% | 3% |

Debt Analysis

Both companies have prudently managed their debt levels during the study period. Deepak Nitrite became debt-free, while Deepak Fertilisers’ debt/equity ratio decreased from 1.5 in FY19 to 0.7 in FY23. Additionally, both companies improved their interest coverage ratios.

Future Plans

Future Plans of Deepak Nitrite

Deepak Nitrite has announced a substantial investment of Rs 2,500 crore over the next few years for various projects. Their management focuses on ensuring raw material availability, backward integration, product portfolio diversification, and incorporating new chemistry platforms.

Future Plans of Deepak Fertilisers

DFPCL has earmarked a significant investment of Rs 4,350 crore to increase its ammonia capacity to 6,28,700 MTPA by FY26. Additionally, they plan a capital expenditure of Rs 2,201 crore to reach a production of 8,62,900 MTPA of technical ammonium nitrate by FY26.

Key Metrics

Conclusion

In conclusion, our comparative analysis of Deepak Nitrite vs. Deepak Fertilisers reveals that, in various aspects, DNL is a stronger business than DFPCL, although it faced challenges in FY23. Despite this, it trades at a higher P/E ratio, resulting in a market capitalization of Rs 27,437 crore compared to DFPCL’s Rs 6,700 crore.

However, with significant capital expenditure plans, Deepak Fertilisers and Petrochemicals also show promise. Investors should consider future earnings from these new projects when assessing the long-term potential of these companies.

Which company do you believe will outperform in the future? Do you hold or plan to buy shares in either of these companies? Join the conversation in the comments below.

This reorganized article provides a comprehensive comparative analysis of Deepak Nitrite and Deepak Fertilisers, helping readers understand their businesses, financial performance, and future prospects.