Prabhudas Lilladher's research report on Deepak Nitrite
DN reported sluggish numbers on account of inventory destocking, slowdown in EU & other markets and dumping of products by China at cheap prices. Management expects Advanced Intermediates segment & phenolics division to recover only in H2FY24, however major volume growth to be seen post commercialization of downstream products. Company’s aggressive growth plans for backward as well as forward integration, entry into solvent & polycarbonate business to keep long term growth story intact, however near-term demand headwinds persists. While we remain positive on the long term story, we believe, phenolic margins to remain under pressure given lower phenol realizations.
Outlook
We thereby forecast EPS to decline to Rs 62 in FY24 before recovering to Rs 82 in FY25. We value the company at 22x FY25 EPS and recommend a Reduce rating on the stock with a target price of Rs1,803.
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