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Ventura Securities
Deepak Fertilisers (Buy)
Target: ₹368
CMP: ₹280.1
Deepak Fertilisers and Petrochemicals Corporation Ltd is a unique play on the ammonia vertical, with products spanning industrial chemicals to fertilizers. DFPCL enjoys a leadership position in a majority of its products like IPA, Bentonite sulphur, Nitric acid (2nd largest in SE Asia), TAN etc.
We believe DFPCL is at the cusp of a major re-rating story given the strong outlook for its chemical products business; NPK and differentiated NPK (branded as Smartek) to be the drivers in the near term, led by price realisation and volume growth; fresh capex (about ₹1,580-1800 crore) to ramp up its leadership TAN business capacity to 863K MTPA (77 per cent) which should cater to medium to long-term growth.
We expect revenues to grow at 8.1 per cent CAGR over FY21-24 to ₹7,208.6 crore (4.6 per cent CAGR for chemicals business including trading to ₹3,514.3 crore, 11.8 per cent CAGR for fertiliser business including trading to ₹3,664.8 crore and other segments, namely realty & windmills, to grow at 13.8/-11.6 per cent CAGR respectively, to ₹29.4 crore cumulatively).
We initiate coverage with a price target of ₹368 (8.0x FY24E EPS) over the next 24 months.
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