Deepak Fertilisers Shares Hit New 52-Week High: Will The Stock Rally Any Further?

Shares of Deepak Fertilisers in intra-day trade on June 15, 2021 (Tuesday) hit a fresh 52-week high of Rs. 474.5 per share, gaining close to 6 percent on the NSE. The scrip of the fertilizers company has been gaining for the past few days and in a week's time has surged by over 58 percent considering the closing price of Rs. 299.85 on June 7, 2021.

As per the exchange data, one of the promoters of the company, Robust Marketing Services Pvt. Limited, bought 93,000 shares or 0.09 percent stake in the company valued at Rs. 2.75 crore through open market transaction between June 3 and June 7, 2021.

Government hiked fertilizer subsidy allocation by Rs. 14,775 crore in May

In May this year, the government increased the fertilizer subsidy allocation by Rs. 14,775 crore, taking the total outlay for FY 2022 to Rs. 94,305 crore. The statement then released said, "It was discussed that the price of fertilisers is undergoing an increase due to the rising prices of phosphoric acid, ammonia etc internationally. PM stressed that farmers should get fertilisers at old rates despite the international rise in prices."

"Thus, despite the rise in international market prices of DAP, it has been decided to continue selling it at the older price of Rs 1200 and the central government has decided to bear all the burden of price hike," it added.

Now as the higher input cost shall be neutralized, there shall be seen less disruption in demand and margins for the company shall hence improve over a period of time.

For the March ended quarter of FY21, the company recorded five-times jump in its consolidated net profit to Rs. 116 crore as against Rs. 23 crore in the same quarter in the year ago period. Operating revenue at the company also registered a good growth of over 21 percent YoY to Rs. 1575 crore. Also, the company announced final dividend of Rs. 7.5 per share for FY21.

Should you Buy, Hold or Sell Deepak Fertilisers?

The scrip of Deepak Fertilisers has been given a 'Buy' rating for reasons such as

1. Operating profit has increased by an annual rate of over 21 percent which implies healthy long term growth outlook

2. Technically also stock is in bullish zone. Speaking of the charts, trend has improved from marginally bullish on May 5 and since then the stocks has generated 70 percent returns

3. Other financial parameters that are positive for the company are
- Debt to equity ratio -0.88 times (lowest)
- Net sales had been the highest
- For the last 5 quarters the company is reporting positive earnings results.

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