Sell Deepak Nitrite, target price Rs 1605: HDFC Securities

HDFC Securities has sell call on Deepak Nitrite with a target price of Rs 1605.0. The current market price of Deepak Nitrite Ltd. is Rs 2015.25 Time period given by analyst is year when Deepak Nitrite price can reach defined target.
Deepak Nitrite Ltd., incorporated in the year 1970, is a Mid Cap company (having a market cap of Rs 27412.27 Crore) operating in Chemicals sector.

Deepak Nitrite Ltd. key Products/Revenue Segments include Fine Chemicals, Export Incentives, Sale of services, Scrap and Other Operating Revenue for the year ending 31-Mar-2022.


Financials
For the quarter ended 30-06-2022, the company reported a Consolidated Total Income of Rs 2067.60 Crore, up 10.22 % from last quarter Total Income of Rs 1875.89 Crore and up 34.74 % from last year same quarter Total Income of Rs 1534.47 Crore. Company reported net profit after tax of Rs 234.62 Crore in latest quarter.

Investment Rationale
The brokerage maintains SELL on Deepak Nitrite, with a price target of INR 1,605 (WACC 11.5%, terminal growth 4.5%). The stock is currently trading at 18.7x FY24E EPS. It believes that (1) high input costs will continue to put pressure on the company’s margin and (2) further growth in DPL is capped as the phenol plant is already running at full capacity.

Promoter/FII Holdings
Promoters held 45.72 per cent stake in the company as of 30-Jun-2022, while FIIs owned 9.07 per cent, DIIs 10.71 per cent.