Deepak Nitrite faces project delays and declining revenue

Deepak Nitrite is facing challenges as key projects have been delayed, pushing completion dates to the first half of FY26 instead of the planned second half of FY25. This includes the construction of a nitric acid plant. Since the start of 2025, Deepak Nitrite's shares have dropped by 22%. Much of this decline occurred after the company reported disappointing earnings for the third quarter. Factors contributing to this included order delays, maintenance shutdowns, and lower profit margins in its main segments: advanced intermediates and phenolics. Despite these setbacks, Deepak Nitrite's management is optimistic about future growth. They believe that the new nitric acid project could significantly increase annual profits by ₹70 crore-₹80 crore, benefiting the advanced intermediates segment. The company expects that increasing production of phenol will help reduce imports in India. In the December quarter, Deepak Nitrite's revenue fell by 5.3% from the previous year, totaling ₹1,903 crore. Operating profit dropped by 40%, and net profit decreased by 51%. These declines were largely due to a planned maintenance shutdown, weak demand in the agrochemical market, and high raw material costs. The advanced intermediates business saw an 18% drop in revenue, mainly due to low domestic demand and inventory reductions. Although exports to international markets resumed, they have not been enough to offset the decline. Analysts have lowered their earnings forecasts for the company for FY26 and FY27 by 16-17%, citing delays and higher anticipated debt from capital projects. JM Financial has also reduced its target share price for Deepak Nitrite, although it remains confident in the company's potential to significantly increase its earnings in the next five years.