Mumbai : PL Capital – Prabhudas Lilladher, one of the most trusted financial services organisations in India in its latest beat report on DEEPAK FERTILISERS AND PETROCHEMICALS LTD cited that Deepak Fertilisers holds a dominant position in the Indian Nitric Acid business with a 45% market share and is increasing capacity by 450 KTPA with a capex of ₹1,950 crore. PL Capital believes that capex in ammonia, TAN and Nitric Acid will aid growth in FY25-26 across all verticals along with better monsoon supporting crop business, and value’s it at 18X FY26 EPS arriving at a target of ₹1,355.
Industry Growth
In 2023, the global Nitric Acid market was valued at $31.77 billion and is expected to increase from $32.94 billion in 2024 to $44.09 billion by 2032, with a compound annual growth rate (CAGR) of 3.71% during the forecast period from 2024 to 2032. The ammonium nitrate market was valued at $18.38 billion in 2023 and is projected to grow to $25.86 billion by 2031, with a compound annual growth rate (CAGR) of 4.4% from 2024 to 2031. DFPCL is a major producer of technical ammonium nitrate (TAN) and aims to become the third-largest producer globally within the next two years.
Titanium Ammonium Nitrate (TAN) Segment
The outlook for technical ammonium nitrate (TAN) has improved, with the ammonia spread over natural gas increasing, along with the ammonium nitrate spread over ammonia. DFPCL has achieved backward integration with a ₹4,500 crore investment in ammonia and has secured medium-term gas-based contracts. The export ban on technical ammonium nitrate (TAN) in FY24 has now been lifted. The 2024 Budget proposed increased duties on ammonium nitrate while reducing duties on precious metals used for catalysts, both of which are expected to have a positive impact.
Nitric Acid and IPA segment
The price of nitric acid remains stable, while isopropanol (IPA) prices are strong due to reduced exports from Europe. There is a brownfield expansion in nitric acid with WNA (300 KTPA) and CNA (150 KTPA) at a project cost of ₹1,950 crore. Sixty-five percent of the additional CNA capacity is secured under a 20-year contract, and a significant portion of this capital expenditure will be received by the company as a subsidy.
Market Outlook
The outlook for the TAN business is positive, supported by capital expenditures and an increased ammonium nitrate spread over ammonia. Nitric acid prices remain stable, and volume expansion is anticipated due to these investments, as well as the introduction of a service component in the commodity business. Capital expenditures in ammonia, TAN, and nitric acid are expected to drive growth across all verticals in FY25-26, bolstered by improved monsoon conditions that will benefit the crop sector.
