Deepak Nitrite Q3 Results Review — Headwinds Persist, Says Systematix, Maintains 'Hold' Rating On The Stock

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Systematix Research Report

Deepak Nitrite Ltd.'s Q3 FY25 result missed estimates, dragged by multi-year low margins in Advanced Intermediates and weak phenol spreads in the Phenolics segments. Consolidated revenue at Rs 19 billion (-5% YoY, -6% QoQ) was broadly in line, but gross margin contracted by sharp 487 bps YoY and 516 bps QoQ to 26.8%, (estimate of 33%). Ebitda plummeted 45% YoY and 43% QoQ to Rs 1.7 billion (38% below estimate), as margin shrunk 631 bps YoY and 579 bps QoQ to 8.9% due to cyclical factors (agrochemical destocking, China oversupply) and transient costs (plant shutdowns).

Revenue in the AI segment (~29% of revenue) fell 18% YoY, with Ebit margin hitting a multi-year low of 3.1%, down 1,084 bps YoY, due to subdued agrochemical demand and transient increase in feedstock price. Phenolics (~71% of revenue) posted modest 1% YoY revenue growth, but Ebit fell 33% YoY, causing margin to compress 445bps YoY to 8.9%, due to higher input prices and maintenance shutdown costs.

Higher interest expenses (+109% YoY) and 51% YoY/49% QoQ decline in PAT to Rs 981 million underscored the weakness during the quarter. While we expect demand to normalize in agrochemicals and operations to improve in the Phenolics segment during 4Q, Deepak Nitrite’s earnings volatility could persist near term, as both segments continue to face challenges.

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