Leading Indian chemical firm Deepak Nitrite Ltd. has revealed a sharp drop in net profit in its third-quarter financial data for FY2025. Rising raw material costs and slow recovery in key categories are putting pressure on the company's margins as it makes intermediate products for the agrochemical, paint, cosmetic, and pharmaceutical industries.
Investors' concerns have increased in response to the Q3 data, leading to a significant drop in the company's stock price. This article looks in-depth at Deepak Nitrite's Q3 performance and the variables that influenced its stock performance.
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Q3 FY25 Financial Performance
In Q3FY25, Deepak Nitrite reported a net profit of ₹98 crore, a significant decline of 51.5% from ₹202 crore in the same quarter last year. Due to weak demand in key sectors, the company's sales also declined 5.3% year-on-year to ₹1,903.4 crore from ₹2,009.2 crore.
EBITDA in Q3FY24 declined 44.7% year-on-year to ₹168.5 crore from ₹304.6 crore, due to lower realisations and increased input expenses. Compared to the same quarter last year, when operating margins were 15.2%, they fell sharply to 8.9%, reflecting lower pricing power and cost constraints.
Metric | Q3 FY25 (₹ crore) | Q3 FY24 (₹ crore) | Change (%) |
Net Profit | 98 | 202 | -51.50% |
Revenue | 1,903.40 | 2,009.20 | -5.30% |
EBITDA | 168.5 | 304.6 | -44.70% |
Operating Margin | 8.90% | 15.20% |
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Factors Contributing to the Weak Performance
Challenging environment: The chemical industry is now grappling with a difficult environment, with lower demand across end-user sectors including paints, cosmetics and pharmaceuticals.
Operating performance: The company's operating performance was "extremely poor" throughout the quarter due to a "perfect storm" of factory shutdowns caused by deferred demand.
Lag adjusted recovery: Excess supply from China, high raw material costs and delays in agrochemical intermediates further impacted performance.
Transient Feedstock price increase: Due to a temporary increase in feedstock prices, margins declined.
Stock Market Reaction
Deepak Nitrite's share price fell sharply when its third quarter results were announced. Deepak Nitrite's stock fell 10% on February 14, 2025, as the company's poor third quarter results impacted market sentiment. Investor nervousness is reflected in the fact that Deepak Nitrite's stock closed at ₹2,231 on the BSE ahead of the earnings announcement.
Analysts Expectations
Analysts at Nuvama Institutional Equities predicted poor quarter-end results for Deepak Nitrite due to negative phenol/acetone spreads. Additionally, they anticipated that inventory receipts worldwide, especially in the agrochemical intermediates sector, would create difficulties for the advanced intermediates portfolio. With revenue of Rs 2,004.4 crore for the December 2024 quarter, the brokerage estimated Deepak Nitrite's net profit to be Rs 178 crore. Analysts at Elara Capital projected Deepak Nitrite to post EBITDA of Rs 247.4 crore, sales of Rs 1,991.4 crore and net profit of Rs 159.5 crore.
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