Buy Deepak Fertiliser; target of Rs 173: Edelweiss

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26 Aug, 2025 12:21

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Edelweiss's research report on Deepak FertiliserDeepak Fertiliser’s (DFPC) Q3FY16 revenue/EBITDA grew 28.4%/70.5% YoY owing to low base as its fertiliser plant had been shut during Q3FY15 due to unavailability of gas. Key positives were: 1) chemical segment revenue grew 15% YoY due to better volumes in acid and TAN businesses; (2) chemical EBIT margin jumped 570bps YoY on lower ammonia prices; and (3) fertiliser revenue grew 2.1x YoY. Key negatives were: (1) higher gas cost dented profitability of fertiliser business; and (2) fall in global commodity prices and forex volatility impacted IPA margin. Gas supply is yet to resume in DFPC’s plant despite Delhi High Court’s favourable decision. However, in our FY17E we have factored in normalisation of gas availability and withheld subsidy issues. Maintain ‘BUY’. We assume that gas availability and the withheld subsidy situation will normalise in FY17 in our estimates. Hence, we expect revival in overall volumes and profitability in FY17/18. We introduce and roll over target price to FY18E EPS. We maintain ‘BUY’ with a revised target price of INR173 (INR150 earlier), based on 6x FY18E EPS (earlier 6x FY17E EPS). The stock is trading at 12.5x FY16E and 7x FY17E EPS. For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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