Deepak Nitrite Hits A Record On Higher Phenol Spreads

Shares of Deepak Nitrite have tripled from their 52-week low in March this year.

A scientist mixes chemicals inside the new lab. (Photographer: Eric Thayer/Bloomberg)
A scientist mixes chemicals inside the new lab. (Photographer: Eric Thayer/Bloomberg)

Shares of Deepak Nitrite Ltd. rose to a record as economic activity continues to pick up after the government eased Covid-19 restrictions.

The chemical maker's stock hit Rs 923.25, an all-time high, in Wednesday's trade, having surged threefold from its 52-week low of Rs 310 on March 19. That's aided by higher margins on phenol.

"Average spreads for phenol are up 37.6% year-on-year and 11.6% quarter-on-quarter," B&K Securities wrote in a note on Dec. 9. "We understand that the spreads for Deepak Nitrite are 15-20% higher as they enjoy operational efficiencies."

The company's wholly owned subsidiary Deepak Phenolics commenced commercial production of isopropyl alcohol, a key ingredient for hand sanitisers, at its Dahej, Gujarat facility in April after the Covid-19 pandemic. The facility has a manufacturing capacity of 30,000 million tonnes.

"Despite the correction in spreads from Q2FY21 onwards, the company would enjoy higher margins as it manufactures pharmaceutical grade isopropyl alcohol, which fetches a premium in the market," B&K Securities said.

In an interaction with BloombergQuint in November, Maulik Mehta, chief executive officer and executive director at the company, had said while it is natural to assume that the fourth quarter will be better than the third, and the third better than the second, improvement in performance will be subject to things remaining constant on the transportation and production front.

He was cautiously positive that the firm will look significantly different and better in 2025. It will be able to take up multiple opportunities of the size and nature of what it took four years ago when it set up the largest phenol plant in the country, he had said.

All seven analysts that track Deepak Nitrite recommend a 'buy', according to Bloomberg data. The stock is trading around its 12-month Bloomberg consensus price target of Rs 919.5 apiece.