Motilal Oswal's research report on Deepak Nitrite
Deepak Nitrite (DN) reported an in-line 3QFY23 performance, after adjusting for a government incentive income recognized during the quarter. EBITDA was at INR3.1b; while EBITDA margin stood at 15.8%, still at multi quarter lows. Even though Phenolic division’s margin grew sequentially, it was down 700bp YoY. The AI segment’s margin also contracted 330bp YoY in 3QFY23. Management highlighted that AI segment’s revenue increased due to healthy demand from key customers and a sharp rise in exports during the quarter, even as the company was unable to fully pass on the hike in input costs to customers.
Outlook
The stock trades at 20x FY24E EPS of INR89 and 13x FY24E EV/EBITDA. We retain our Neutral rating as the focus of DN remains on commodities rather than on specialty or complex commodities. Valuing the stock at 20x Dec’24E EPS, we arrive at our TP of INR1,890.
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