Deepak Fertilisers Q3 Profit Declines Amid Softening Chemical Demand and Rising Costs
Deepak Fertilisers and Petrochemicals Group has reported a significant 43.6% decrease in profit for the third quarter, attributed largely to falling agrochemical demand and escalating input costs that are negatively impacting margins.
Key Financial Highlights
– Consolidated Net Profit:
– Q3 2022: 1.41 billion rupees ($15.33 million)
– Q3 2021: 2.51 billion rupees
– Fertilisers Segment Growth:
– Increased by 26%
– Chemicals Segment Decline:
– Decreased by 7.5%
– Total Expenses:
– Rose by 17%, primarily driven by higher material costs.
Shares for Deepak Fertilisers experienced a decline, closing down by approximately 7% on the news.
Market Context for Deepak Fertilisers
The pressure on fertiliser manufacturers, including Deepak Fertilisers, stems from several factors that are reshaping the sector:
– Rising Sulphur and Ammonia Prices: Input costs continue to climb, making it challenging for companies to maintain profitability.
– Government Subsidies: Current subsidies have not been sufficient to alleviate the financial burden.
– Price Adjustments: To counteract the rising costs, companies have begun implementing modest price increases, but these may not fully offset the financial strain, particularly for manufacturers of complex fertilisers.
Despite facing these challenges, the fertiliser segment is expected to fare better than the agrochemicals industry, bolstered by steadier demand and more promising long-term growth prospects.
Comparison with Industry Peers
| Company | Profit Growth (%) | Analyst Sentiment | Price Target | Stock Return (%) |
|————————————-|——————-|——————-|————–|——————-|
| Deepak Fertilisers | 12.5 | Buy | 36.1 | 0.64 |
| Coromandel International | 24.0 | Hold | 28.75 | 0.86 |
| SRF Ltd. | 35.0 | Buy | 27.30 | 0.87 |
| Sumitomo Chemical India | 31.0 | Hold | 17.16 | 0.69 |
Conclusion
The drop in profit for Deepak Fertilisers highlights significant pressures within the fertiliser market, largely a result of decreased chemical demand and soaring costs. As the sector adapts to these challenges, companies like Deepak Fertilisers will need to navigate carefully to sustain profitability. They are better positioned than those in the agrochemical space, but ongoing vigilance regarding material costs and market dynamics remains crucial.