Moneycontrol
Last Updated : Mar 08, 2013 09:49 AM IST | Source: CNBC-TV18

Deepak Nitrite can move to Rs 320: SP Tulsian

Deepak Nitrite can move to about Rs 320 in next 12 months, says SP Tulsian, sptulsian.com. For nine months, they had posted a top line of Rs 710 crore, while this was at Rs 790 crore for whole of FY12. However, the operating profit is remaining same for both the periods.

Deepak Nitrite can move to about Rs 320 in next 12 months, says SP Tulsian, sptulsian.com. 
 
Tulsian told CNBC-TV18, "Deepak Nitrite is leading maker of organic, inorganic, fine and speciality chemicals. Lately this company has moved into high margin products, which are catering to pharma, rubber, colourants and imaging products, paper products and so many other industries where this chemical is used."
 
He further added, "They have five plants in India predominantly in Gujarat, Karnataka and Maharashtra. If I go by their financial performance for nine months, they had posted a top line of Rs 710 crore, while this was at Rs 790 crore for whole of FY12. However, the operating profit is remaining same for both the periods. For nine months the operating profit is at Rs 37 crore, which was also at Rs 37 crore for whole of FY12."
 
"What I liked about the company is that they have improved their profit after tax (PAT) because of control on cost and all that. And EPS has been at Rs 27 for nine months against Rs 22 for whole of FY12. Company paid a dividend of 60 percent for FY12. So if I go by the present trend the EPS of Rs 27, which they have posted for nine months has been identical in all three quarters closer to Rs 8.50 to about Rs 9.50."
 
"One can safely assume that the company is likely to post an EPS of closer to Rs 8 at least for Q4 which will take the EPS to about Rs 35 for FY13. However, now the focus has shifted on high value high margin products, I am expecting the company to post an EPS of Rs 40 plus for FY14."
 
"If I go by the present share price the share is ruling at 6.5-7 times and even the book value of the share as on December 31 has been at about Rs 270. So considering the track record, the equity is quite low, they have an equity base of less than Rs 11 crore. So if I go by the track record and improvement in profits, these chemical companies are ruling at a low PE multiple. However, in this case with the increase in the bottom-line, increase in margin one can expect PE to get applied at about Rs 9 or so. So taking all this into account, I am expecting that stock can move to about Rs 320 in next 12 months or so."
 
Disclosure: No holding or interests in above stock.
First Published on Mar 8, 2013 09:49 am
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