Motilal Oswal's research report on Deepak Nitrite
Deepak Nitrite (DN) delivered an overall beat in 2QFY24, led by a strongerthan-expected performance in the Phenolic segment, partially offset by weakness in the Advanced Intermediate (AI) segment. EBITDA at INR3b beat our estimate by 9%, while PAT grew by 18% YoY and was at INR2.1b (estimate of INR1.4b). Margin also improved substantially on YoY basis. The strong performance in the Phenolic segment was driven by a sharp increase in volumes of Phenol, Acetone and IPA and improvement in capacity utilization to 137% 2QFY24 (vs. 129% in 2QFY23). Spreads were also stable or higher owing to operating leverage benefits. Domestic contribution partially mitigated the impact of subdued demand in the EU and USA.
Outlook
The stock trades at ~24x FY25E EPS of INR85.2 and at ~17x FY25E EV/EBITDA. We reiterate our Neutral rating, valuing the stock at 25x FY25E EPS to arrive at a TP of INR2,130.
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