Hold Deepak Nitrite; target of Rs 1768: Prabhudas Lilladher

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26 Aug, 2025 12:21

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Prabhudas Lilladher's research report on Deepak Nitrite

DN’s Q2FY26 adjusted revenue stood at Rs18.8bn, declining by 7.2% YoY but was stable QoQ. Operating performance was impacted by ongoing pricing pressure, oversupply from China, and a decline in spreads. The Advanced Intermediates segment was impacted by effects of US tariffs as well as due to continued influx of Chinese products, leading to 3% decline in revenue. The Phenols segment reported 2%-3% volume growth, but profitability remained subdued due to lower spreads. Projects such as Nitric acid and MIBK/MIBC are likely to come online in Q4FY26. The total planned capex for the polycarbonate value chain stands at Rs85bn, the project timeline has been changed from previously guided Dec’27 to March’28, we believe that the project may face further delays. DN has been undertaking numerous growth initiatives, primarily in the Phenolics segment.

Outlook

Domestic demand for phenol is expected to remain stronger; however, the threat of cheap imports will likely keep margins under pressure. The stock is currently trading at ~28x Sep’27 EPS. We value the stock at 28x Sep’27 EPS and maintain ‘HOLD’ rating.

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Deepak Nitrite - 17112025 - prabhu