Deepak Nitrite's new nitric acid plant is running at half capacity
Technical issues at a key new plant are crimping output, but management expects the June quarter to improve. Feedstock hedging lifted Q4 margins.
What's new
- New concentrated nitric acid plant is running at only 45% capacity due to technical issues.
- Strategic feedstock hedging helped lift Q4 EBITDA margin to 18%.
- MIBK/MIBC project on track for commissioning in Q2 FY27; polycarbonate plant due June 2028.
Why this matters
The 45% utilisation rate at a brand-new plant is a direct hit to expected volume growth and near-term earnings. Hedging bought the company some margin room in Q4, but the operational stumble at the nitric acid unit overshadows it.
What we're watching
- Resolution of the technical issues at the nitric acid plant and a timeline for ramp-up.
- Commissioning progress on the MIBK/MIBC project in Q2 FY27.
- Whether Q1 FY27 actually beats Q4 FY26 as management expects.
The full read
Deepak Nitrite's Q4 earnings call revealed a mixed picture. A 45% utilisation rate at its new concentrated nitric acid plant, due to technical issues, is a clear operational drag. The company's strategic feedstock hedging mitigated some cost pressure, supporting an 18% EBITDA margin on ₹2,127 crore in revenue and ₹383 crore in EBITDA. Management offered a confident outlook, guiding that Q1 FY27 should beat the just-reported Q4 FY26. The project pipeline is advancing, with MIBK/MIBC set for commissioning this quarter and the polycarbonate plant on track for June 2028. The near-term focus is the nitric acid plant. A new unit running at half capacity is a problem that hedging gains cannot mask.
Questions answered
- Why is the new nitric acid plant only running at 45%?
- Deepak Nitrite disclosed on the earnings call that technical issues have limited the plant's utilisation. Management did not provide a specific timeline for resolving the problems.
- How did feedstock hedging affect Q4 results?
- Management said strategic hedging of feedstock costs aided margins. The company reported a consolidated EBITDA margin of 18% for the quarter, with EBITDA of ₹383 crore on revenue of ₹2,127 crore.
- What is the status of the other major projects?
- The MIBK/MIBC project is on track to be commissioned in Q2 FY27. The polycarbonate project remains scheduled for completion by June 2028.
- What is management's outlook for the next quarter?
- Management expressed confidence that the June quarter (Q1 FY27) would outperform the March quarter (Q4 FY26). No specific guidance was provided.