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Stock To Sell: HDFC Securities Assigns Sell Call To This Mid Cap Multibagger Chemicals Stock
Leading brokerage firm HDFC Securities has assigned sell call to the stock of Deepak Nitrite Ltd with a target price of Rs 1665 apiece. The current market price of the stock is Rs 2119 apiece with an intraday gain of 1.92% on November 11, 2022. The company has a market capitalisation of Rs 28,901.69 crore. The stock has given multibagger returns. Check key takeaways below:
1. Financial Performance
Revenue grew 17% YoY to INR 19.6bn in Q2, led by strong volume growth in the phenolics segment. Revenue was impacted as there was a loss of production at the Nandesari unit due to the fire that occurred on 2 June 2022. The Nandesari plant started its operations in a phased manner and has been operating at full capacity from Oct-22. EBITDA fell 30% YoY to INR 2.7bn.
2. Stock Outlook And Return
The current market price of the stock is Rs 2119 apiece with 52-week high at Rs 2690 apiece and 52-week low at Rs 1682 apiece, respectively. The stock has given a return of 870% in last 5-years and 470% in last 3-years.
3. Investment in Deepak Oman Industries FZC LLC ('DOIL')
The Board has approved an investment of up to 51% of the equity share capital of DOIL situated in Oman at an approximate cost of USD 14.4mn. DOIL will be setting up a project to manufacture sodium nitrate and sodium nitrite products in which DNL has deep customer connects and market insights.
4. Valuation
According to HDFC Securities, "We maintain SELL on Deepak Nitrite (DNL), with a price target of INR 1,665 (WACC 11.5%, terminal growth 4.5%). The stock is currently trading at 20x FY24E EPS. We believe that (1) high input, utility and logistic 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. EBITDA/APAT were 26/28% below estimates, owing to substantially higherthan-expected raw material costs and higher-than-expected tax outgo."
5. About Deepak Nitrite
Deepak Nitrite is a chemical manufacturing company based out of Gujarat, India. It came into existence in 1970. The mid-cap company is a leading manufacturer of organic, inorganic, fine, and specialty chemicals.
It also manufactures a wide range of intermediates for use in industrial explosives, paints, cosmetics, polymers, optical brighteners, and others.
Disclaimer
The stock has been picked from the brokerage report of HDFC Securities. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.
