CD Equisearch's research report on Deepak Nitrite
Driven by higher volumes in performance products and fuel additives, Deepak's advanced intermediates business saw a modest revenue growth last quarter. Slowdown in demand in Western world was countered by foray in newer regions which also led to improvement in product mix. The business suffered from the onslaught of inventory destocking by Chinese suppliers and elevated freight rates which took the sheen off exports to EU and US. Its EBIT margin all but swooned to 9.3% in Q1FY25 when compared with 16.25 in the same quarter a year ago. Deepak’s AI business continued to feel the pressure on product realizations accentuated by timid recovery in global agro chemicals industry. The business outlook continues to be muddled by demand stress in agro chemicals industry, though other end user segments such as dyes & pigments, paper, homecare, etc. have started to see improvement in demand.
Outlook
Fluctuations in global freight rates will be all but unsettle exports of advanced intermediates. Weighing odds, we assign hold rating on the stock with revised target of Rs 2596 (previous target: Rs 2426) based on 30x FY26e earnings over a period of 6-9 months.
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