Deepak Nitrite Shares Plunge 15% to 52-Week Low After Disappointing Q3 Earnings

Shares of Deepak Nitrite Ltd plummeted to a 15-month low on Friday, hitting the lower circuit limit, following the company’s disappointing Q3 FY25 earnings report. The specialty chemicals manufacturer saw a significant drop in its financial performance due to a combination of factors, including higher input costs, weak demand in agrochemical intermediates, and plant shutdowns.

For Q3 FY25, Deepak Nitrite reported a 51% year-on-year decline in net profit, which fell to Rs 98 crore. The decline was largely attributed to increased raw material costs and challenges in the agrochemical sector.

The company’s revenue also dropped by 5% year-on-year to Rs 1,924 crore. Its EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) fell by 40%, amounting to Rs 190 crore, due to a significant contraction in margins. The EBITDA margin decreased to 10%, compared to 16% in the same quarter last year, reflecting the pressures from rising raw material costs.

According to the company, oversupply from China and deferred demand in key segments were key headwinds affecting performance.

The significant decline in EBITDA, net profit, and the contraction in margins triggered a sharp sell-off in Deepak Nitrite's stock. Investors are likely concerned about the company’s near-term challenges and their potential long-term impact on its performance. The stock was trading at Rs 1,909, down 329.05 points or 14.71% on the NSE at 01:08 PM.

Deepak Nitrite’s stock has fallen over 18.5% in the past month and nearly 23.7% year-to-date (YTD). Over the past six months, the chemical stock has declined by 33%, and it has seen a drop of over 15% in the past year.

Despite the short-term challenges, Deepak Nitrite remains optimistic about the future. The company expects a revival in demand for agrochemicals and anticipates that domestic customers will resume purchases in Q4. Additionally, the company commissioned four new projects during the reported quarter and continues to advance with its Nitric Acid and Polycarbonate Resin projects. It aims to complete major expansions by FY28.

On a broader industry level, Deepak Nitrite has noted initial signs of improved demand from international customers. The company also expects domestic demand to recover from Q4 onwards, leading to the normalization of demand patterns. The company further indicated that certain intermediates, which experienced transient feedstock increases, could see margin expansion as raw material prices, which had been elevated, are expected to ease in the near future.