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CE Equisearch
Deepak Nitrite (Accumulate)
CMP: ₹220.25
Target: ₹251
Sorted into basic chemicals, fine & speciality chemicals (FSC) and performance products, Deepak Nitrite Ltd’s product portfolio comprises organic, inorganic and fine chemicals — for use in detergents, colorants, paper, agro chemicals, rubber, etc.
The stock currently trades at 32.9x FY18e EPS of ₹6.50 and 20.5x FY19e EPS of ₹10.45. Recovery in earnings this fiscal partly rests on sustained firmness in crude oil markets and resurrection in exports of key FSC intermediates.
Widening on newer regions (Europe for instance) and end-user industries with patented products for performance products segment is aimed at curtailing losses. Yet vulnerability of earnings to near unpredictability of market reach with regards to phenol and acetone capacities cannot be sorely gainsaid. We, therefore, assign ‘accumulate’ rating on the stock with revised target of ₹251 based on 24xFY19 earnings, over a period of 6-9 months.
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