Reduce Deepak Nitrite: target of Rs 1800: Emkay Global Financial

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26 Aug, 2025 12:21

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Deepak Nitrate’s Q1FY26 EBITDA at Rs1.7bn (down 44% YoY; up 11% QoQ) was in line with our estimate, albeit below consensus estimate. The AI segment saw muted global demand and delayed offtake of agchem intermediates (expected to normalize in ensuing quarters). The Phenolics business saw steady demand with better realization, buoyed by capacity augmentation; however, spreads have been under pressure since the last 3 quarters. The mgmt expects FY26 capex at Rs8-10bn (vs 12-15bn earlier) and plans to incur capex of Rs100bn by FY28 to set up an integrated phenol-BPA-polycarbonate plant. We cut FY26E/27E/28E EBITDA by 27%/23%/28%,

factoring in lower spreads in the phenolics business in the medium term due to capacity adds in China and cheaper imports leading to sustained pressure on spreads. We retain REDUCE, while cutting our SoTP-based TP by 10% to Rs1,800 (from Rs2,000 earlier).

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