Reduce Deepak Nitrite; target of Rs 2268: Prabhudas Lilladher

Prabhudas Lilladher recommended Reduce rating on Deepak Nitrite with a target price of Rs 2268 in its research report dated May 22, 2024.

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May 29, 2024 / 14:15 IST

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Prabhudas Lilladher's research report on Deepak Nitrite

Deepak Nitrate faced challenging business environment mainly due to dumping from China at low prices, Red sea crisis and general weakness in chemical market. The management expects performance to improve only after H1FY25, especially in Intermediates segment which saw a 16% decline in revenue YoY. Phenolic segment saw a 25% YoY growth in topline but margin pressure remains. The company is undertaking multiple new projects worth Rs 140bn to be completed by 2027 end. We believe near-term headwinds would keep cash flow constrained with capex slightly higher than PAT+depr. Capex outlook also is not in sync with the projected MOUs. Considering weak outlook in agrochem which accounts for 30-35% of revenues, we cut our EPS estimates for FY26 by 10%. We anticipate ~3% EPS CAGR over FY23-26E.

Outlook

We value the stock at 33x P/E on FY26E EPS of Rs 69 and retain ‘Reduce’ rating with TP of Rs2,268.

For all recommendations report, click here