Deepak Nitrite Q4 Results Review - Margin Pressure To Continue: Prabhudas Lilladher

Prabhudas Lilladher Report

Deepak Nitrate Ltd. faced challenging business environment mainly due to dumping from China at low prices, Red sea crisis and general weakness in chemical market. The management expects performance to improve only after H1 FY25, especially in Intermediates segment which saw a 16% decline in revenue YoY.

Phenolic segment saw a 25% YoY growth in topline but margin pressure remains. The company is undertaking multiple new projects worth Rs 140 billion to be completed by 2027 end.

We believe near-term headwinds would keep cash flow constrained with capex slightly higher than PAT+depriciation.

Capex outlook also is not in sync with the projected MOUs. Considering weak outlook in agrochem which accounts for 30-35% of revenues, we cut our EPS estimates for FY26 by 10%.

We anticipate ~3% earnings per share compound annual growth rate over FY23-26E.

We value the stock at 33 times price/earnings on FY26E EPS of Rs 69 and retain ‘Reduce’ rating with target price of Rs 2,268.

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