Deepak Nitrite shares rally after Kotak Institutional's upgrade to 'Add', target price raised
Shares of Deepak Nitrate gained over 4 percent during the session on March 5 after Kotak Institutional Equities upgraded the stock to 'Add' and raised its fair value target to Rs 2,020.
As of 1:00 pm, Deepak Nitrite shares were trading at Rs 1,934.35 with a gain of 4.12 percent.
The company's Q3FY25 performance was subdued as margin pressure remained severe due to weak pricing across segments, along with low demand for Advanced Intermediates (AI) at a time of agrochemical de-stocking. A planned shutdown at the phenolics plant further led to a volume loss of approximately 15 KTPA.
Deepak Nitrite's net profit sharply fell by 51.5 percent on-year (YoY) while operating margin contracted to 8.9 percent as compared to 15.2 percent in the year-ago quarter, signalling cost pressure and weaker pricing power.
Kotak Institutional Equities has cut its FY25-27 estimated earnings per share by 17-20 percent, upgrading the stock to 'Add' and raising target EV/EBITDA multiple for Phenolics from 10x to 12x. Kotak's note expects growth opportunities in downstream products such as polycarbonate.
Looking ahead to 4QFY25, Kotak said it expects some recovery as deliveries of agrochemical intermediates resume and phenolics volumes normalizes after the plant's resumption. However, industry-wide overcapacity across most products is expected to cap any sharp margin recovery in the near term.
On the growth front, Rs 2,000 crore worth of capex projects are under implementation and expected to come online over the next year, with an estimated annual EBITDA contribution of Rs 300-350 crore.Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.