In Q3FY2009, Deepak Fertilizers & Petrochemicals Corporation Ltd (DFPCL) reported a net profit of Rs22.4 crore, down by 8.5% year on year (y-o-y).
This was on account of sharp correction in the realizations of the chemical segment and higher-than-expected raw material costs that led to a significant contraction in the operating margins during the quarter.
The company’s net sales increased by 32.6% y-o-y to Rs363.4 crore in Q3FY2009, lower compared to ~60% year-on-year (y-o-y) growth seen during H1FY2009. This was primarily due to a sharp decline in chemical prices during the quarter.
The revenues from the chemical segment declined by 17.4% y-o-y to Rs174.8 crore in Q3FY2009 from Rs211.6 crore in Q3FY2008.
This was partially on account of lower realizations and partially due to a 59-day shutdown at Technical Ammonium Nitrate (TAN) plant for capacity expansion.
Revenues from the fertilizer segment increased more than three-fold to Rs195.4 crore due to manifold increase in the manufacturing activity on the back of availability of extra gas by the end of the quarter.
Besides, the company has also calculated the subsidy as per the revised guidelines, leading to higher revenue booking during the quarter.
The fertilizer segment registered a segmental profit of Rs4.4 crore during the quarter as against a loss of Rs5.5 crore in Q3FY2008 and a profit of Rs9.5 crore in Q2FY2009.
The profitable performance registered by the fertiliser segment was due to strong sales seen in the specialized fertilizer segment.
At the current market price of Rs54, the stock is trading at 3.5x its FY2009E earnings per share (EPS) and 4.1x its FY2010E EPS. We maintain our BUY recommendation on the stock.