Edelweiss' research report on Deepak Fertilizer
Deepak Fertiliser (DFPC) reported strong Q3FY17 performance, led by margin expansion in chemical segment by 622bps to 18.3% driven by fall in input ammonia cost and better IPA realisation. Even as fertiliser business extended losses, management was confident of resuming gas supply by year end. With the fertiliser plant shutting down due to nonavailability of gas, we prune our FY17E EPS by 18.5%.
Outlook
However, with commissioning of new complex fertiliser plant, higher chemical margins and gas issues getting addressed, we expect DFPC to record earnings CAGR of 39% over FY17-19. With growth coming back and return ratios back on uptrend, we raise our target multiple to 9x FY19E (from 6x) and arrive at TP of INR 308 (INR 190 earlier). Maintain ‘BUY’.
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