Descon Oxychem Limited (DOL) - March 2023

Descon Oxychem Limited (DOL) – March 2023

Research Team

Table of Contents

Corporate Briefing Notes

Descon Oxychem Limited (DOL) held its corporate briefing session today to discuss its financial results for 1HFY23 and it future outlook.

Key Highlights

● During the 1HFY23, the company reported a revenue of PKR3.5bn, up by 81% YoY. Similarly, net profit of the company clocked in at PKR1bn during the noted period. The increase in profitability is attributed to tremendous growth in export market along with higher prices and volumes.
● Export sales volume has significantly jumped up by 453% YoY as compared to SPLY. The management believes that the margins on exports higher as compared to local sales, thus led to massive surge in the profitability.
● As per the management, the total country’s demand for H2O2 is around 110K tons/annum. Only 76k tons is being meet through DOL and import, whereas the gap of 40K ton remains unfilled.
● Currently company is selling its H2O2 product at around USD650-700/ton compared to an import price of USD500/ton from Bangladesh. The company is charging premium on the account of better quality, and a huge gap between demand and supply.
● The company holds a sufficient inventory for next 7-8 months to mitigate the supply chain disruption. Meanwhile, the management does not expect any shutdown in the future.
● Regarding the textile sector, the management shared that strong demand was witnessed during the 1HFY23 from the sector and expects the same in near term. Any further price hike into RLNG prices will be easily catered due to healthy margins from export market.
● The company has upgraded its food-grade production capacity from 2k to 5k tons through which the company would charge a premium for food-grade products.
● The management informed that the company has a cash rich balance sheet as Debt to equity ratio is 0.10 in 1HFY23 as compared to 0.18 in SPLY, thus the company is well protected in the current high-interest rates environment. The management considers to finance the requirements through internally generated cash.

Future Outlook

● Going-forward, the management plans to reduce the reliance on the textile sector as currently majority of the sales are to the textile sector. Moreover, the company is actively looking for opportunities into different sectors that include; new chemical market, poultry, livestock, paper, cosmetics, and water treatment.

Important Disclosures


This report has been prepared by Chase Securities Pakistan (Private) Limited and is provided for information purposes only. Under no circumstances, this is to be used or considered as an offer to sell or solicitation or any offer to buy. While reasonable care has been taken to ensure that the information contained in this report is not untrue or misleading at the time of its publication, Chase Securities makes no representation as to its accuracy or completeness and it should not be relied upon as such. From time to time, Chase Securities and/or any of its officers or directors may, as permitted by applicable laws, have a position, or otherwise be interested in any transaction, in any securities directly or indirectly subject of this report Chase Securities as a firm may have business relationships, including investment banking relationships with the companies referred to in this report This report is provided only for the information of professional advisers who are expected to make their own investment decisions without undue reliance on this report and Chase Securities accepts no responsibility whatsoever for any direct or indirect consequential loss arising from any use of this report or its contents At the same time, it should be noted that investments in capital markets are also subject to market risks This report may not be reproduced, distributed or published by any recipient for any purpose.

Analyst certification:

The research analyst for this report certifies that 1.All of the views expressed in this report accurately reflect her personal views about the subject and 2.No part of any of the research analyst’s compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst in this report.

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