Stock That Is A Value Pick As It Gets Ready For A Growth Story

Well diversified play

The company is engaged in the manufacturing of Industrial Chemicals (Nitric Acid, Iso Propyl Alcohol, Methanol and Carbon Dioxide) Crop Nutrition (Nitro Phosphate, Nitrogen Phosphorous Potassium variants, Water Soluble Fertilisers and Bentonite Sulphur) and Technical Ammonium Nitrate (Mining Chemicals). Under their value-added real estate (VARE) business, they have India's first-of-its-kind home lifestyle centre called Creaticity in Pune. Creaticity focuses on a holistic real estate experience with state-of-the-art homes and interiors, along with food & beverage and entertainment.

Areas of operations

Deepak Fertilizers according to Anand Rathi operates under two segment: Chemicals and Fertilsers. In chemical segment DFPCL offers three major products: Technical Ammonium Nitrate (TAN), Iso Propyl Alcohol (IPA) and Nitric Acid (NA). In Fertiliser segment the company offers a wide range of NP (Nitro Phosphate), NPK (Nitrogen Phosphorous Potassium) variants, Water Soluble Fertilisers (WSF) and Bentonite Sulphur. The Chemical segment contributes 54.4% to the overall FY21 revenue of which Industrial segment contributes 53% and TAN contributes 47%. Overall chemical segment contributes 78% to the FY21 Result (EBIT). Crop Nutrition Business (CNB) Segment contributes 45.4% % to the overall FY21 revenue and 20.7% to the FY21 Result (EBIT).

The company under VARE, operate India's first-of-its-kind home lifestyle centre called Creaticity in Pune. The revenue share of VARE business is very minimal.

Leadership position

According to Anand Rathi, Deepak Fertilisers and Petrochemicals has maintained its leadership position and market share across all its product offering. It is the largest producer of TAN commanding a market share of 43% and the only manufacturer of high efficiency fertiliser (NPK & Bensulf) with market share of 19%. Deepak Fertilizers according to Anand Rathi, follows a principle of transforming from commodity to specialty product player, backward integration in value chain, product plus solution approach which have started yielding good results for the company in form of improved margin. With ongoing capex getting commissioned during FY24 and FY25 will help the company to further strengthen its margins and gain market share.

Buy the stock for a price target of Rs 810 per share

Anand Rathi has set a price target of Rs 810 on the stock. Being a market leader with commendable market share in all the segments and various initiatives (capex, product differentiation, product plus solution approach ) undertaken by the company,DFPCL is getting itself future ready to ride on India's growth story. "We initiate our coverage with BUY rating on Deepak Fertilizers and Petrochemicals Corporations with a target price of Rs 810 per share," the brokerage has said.

"The company have taken various initiatives which include transforming from commodity to specialty product player, backward integration in value chain, product plus solution approach which have started yielding results. With capex getting commissioned during FY24 and FY25 the company will further benefit with margin expansion and growth in topline," the brokerage house has said.