Deepak Nitrite Ltd. share price target

Deepak Nitrite Ltd: Q3FY18 Result Update : We expect the basic chemicals business to continue showing steady growth on account of demand uptick and supply disruptions from China. The...

Deepak Nitrite Ltd. (DEN) is set to commence commercial operations of acetone-phenol at its 100% subsidiary Deepak Phenolics Ltd. post successful funding of nearly INR 1,250 crore over the...

as compared to the same quarter previous year. The increased profitability is due to the healthy demand in export markets in the Fine & Specialty Chemicals segment and improved realizations in the Basic Chemicals Segment. Recommendation The increased volatility in global prices of major chemicals and improved demand traction due to difficulties in sourcing from China would open up opportunities domestically. Government's focus on eliminating the infrastructure gaps with DNL's focus towards R&D; and developing new variants would benefit the company. Phenol and Acetone's capex will provide DNL a...

Vitality in DNL's basic chemicals business (gross revenues up 12.6%; EBIT up 38.3%) and recognition of insurance claim of Rs 18.33 crs ($2.8m) on account of loss of profits due to business interruption from the fire at its Roha facility last fiscal, failed to buttress revenues (net revenues up a measly 6.1%) last quarter. Delays in getting clearance from local authorities for select high value products in the FSC segment coupled with short supply of some products precluded production of some high margin products. As a result, FSC's gross revenues (excluding insurance claim sum) nosedived...

Misfortune hit DNL's business hard last quarter for the shutdown of its DASDA plant in Hyderabad due to torrential rains was soon followed by a fire in one of the distillation columns of its manufacturing facility at Roha (Maharashtra). Wherefore its income from operations saw the sharpest fall in at least seven quarters and absolute profits showed the lowest reading in thirteen quarters. DASDA plant shutdown (temporary though) accentuated the torpidity in OBA demand for revenues of performance products (erstwhile fluorescent whitening agent) nosedived by a depressing 28.1%....

segments namely basic chemicals, fine and specialty chemicals five manufacturing facilities located at Nandesari, Dahej (Gujarat), Roha, Taloja (Maharashtra) and Hyderabad (Telangana)....

Deepak Nitrite, a leading supplier of organic, inorganic and fine chemicals, specializes in hydrogenation, nitration, customized molecule development, hazardous reactions and toluene derivatives. Its products - manufactured at its plants in Nandesari & Dahej in Gujarat, Roha and Taloja in Maharashtra, and at Hyderabad in Andhra Pradesh - finds end use in agro-chemicals, dyestuffs, pigments, inks, whiteners, pharmaceuticals, fuel additives, textiles and paper. For few products like sodium nitrite, sodium nitrate and nitro toluenes it has market supremacy in India, while for some like xylidines, cumidines and oximes it is amongst top global suppliers.

Valuation: The stock currently trades at 18.4x FY17e EPS of Rs 6.78 and 16.4x FY18e EPS of Rs 7.64. Ramification of adverse fx movement, project delays and subtlety of FWA business - Rs 8.7 crs deficit last fiscal - could somewhat annul forbearance of entrenched FSC (Fine & Specialty Chemicals) and BCC (Bulk Chemicals & Commodities) segments. Yet high entry barriers for the phenol business - multitude of government approvals being one of the many - are nauseating for new entrants. Ample scope exists to launch key derivatives of phenol and acetone at a later stage. They assign buy rating with target of Rs 153 based on 20x FY18e earnings (peg ratio: 0.9) over a period of 6-9 months.