Sell Deepak Nitrite; target of Rs 1630: Motilal Oswal

Motilal Oswal's research report on Deepak Nitrite

Deepak Nitrite (DN) reported a muted operating performance in 1QFY26, as EBITDA declined by 39% YoY to INR1.9b. Gross margin contracted by 280bp YoY to 28% and EBITDA margins contracted by 420bp, led by the persistent pricing pressure and a slower-than-expected recovery in some agrochemical intermediates.Amid a volatile geopolitical environment and shifting global trade dynamics, DN reported volume growth across its diverse product portfolio, driven by a strong recovery in demand from non-agrochemical applications.Considering a muted performance and macroeconomic headwinds, we cut our EPS estimates by 9% for FY26 and largely maintain our FY27 estimates. We value the stock at 25x FY27E EPS to arrive at a TP of INR1,630. Reiterate Sell.

Outlook

. We expect a CAGR of 6%/14%/13% in revenue/EBITDA/adj. PAT over FY25-27 and value the stock at 25x FY27E EPS to arrive at a TP of INR1,630.Reiterate Sell.