Motilal Oswal's research report on Deepak Nitrite
DN (Deepak Nitrite) reported in-line performance, after adjusting for a government incentive income that was recognized in 4QFY23. The company stated that this incentive is being received in DPL and will persist for the next five to six years. EBITDA was at INR3.5b, while EBITDA margin was at 17.7% - still at multi-quarter lows. Despite the sequential growth in the margin of the Phenolic division, it declined by 50bp YoY. The AI segment also experienced a YoY decline of 860bp. The company has announced project delays with respect to its MIBK/ MIBC plants, which would now be commissioned in 1QFY25 (earlier commissioning in 4QFY24), and the debottlenecking of the Phenol plant was also delayed by a quarter to 1QFY24 (earlier commissioning by 4QFY23). DN would also commission BTC/ BTF products in the Photo Chlorination and Fluorination (as announced earlier) chemistries by 3QFY24.
Outlook
The company is aggressively pursuing both backward and forward integration. However, as the company’s entire product portfolio consists of commodities, its current valuation appears rich. We reiterate our Neutral rating with a TP of INR1,775, valuing DN at 20x FY25E EPS of INR89.
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