Reduce Deepak Nitrite; target of Rs 1854: Prabhudas Lilladher

Prabhudas Lilladher's research report on Deepak Nitrite

Deepak Nitrite Ltd (DN) phenolics division likely stands impacted in the near term, due to demand-supply mismatch. DN’s manufacturing facility stands at ~300,000 mtpa phenol/acetone as of FY23. We believe EBIT/kg declined from Rs 23.1/kg to Rs 15/kg over FY22-FY23 and estimate to be at Rs 15/kg thereafter. The company is trading at ~34x FY24 EPS of Rs62.3/share. We anticipate ~13% EPS CAGR over FY23-26E.

Outlook

Considering largely commodity nature of business, we value the stock at 22x Sep’25 EPS and retain ‘Reduce’ rating with TP of Rs 1854 (earlier Rs1803). We are rationalizing our estimates for FY26E, resulting in cut of 21% in EPS estimates.