Private Client Research

Rating

Buy

Sector

Chemicals

Company

Deepak Nitrite Ltd

Chemicals

March 31, 2020

Sensex: 29468.49

CNX Nifty: 8597.75

NSE: DEEPAKNTR

BSE: 506401

Reco Price

Rs. 393.00

Price Target (3 - 6 Months)

Rs. 492.00

Upside

25.19%

Date

March 31, 2020

Sensex

29468.49

CNX Nifty

8597.75

Exchange

Code

NSE

DEEPAKNTR

BSE

506401

Stock Data

CMP (Rs)

385.05

Face value (Rs)

52 Week Range (Rs)

542.50 - 254.75

Market cap (Rs Crores)

5272.95

Price To Book Value (x)

4.09

P/E Ratio (x)

11.20

EV/EBIDTA (x)

8.58

One Year indexed Stock Performance

Deepak Nitrite Ltd Sensex

Return (%)

12m

36m

Absolute

-23.49

29.15

41.74

194.55

Sensex

-22.74

-23.79

-24.19

-0.51

Shareholders

(in %)

31-Dec

Promoter

45.64

Public

54.36

Others

0.00

Total

100

+91 22 6639 3000

research@stockaxis.com

Profile

Deepak Nitrite Limited (DNL) is the flagship of the Deepak Group, which was incorporated in 1970 by Mr. C.K. Mehta. It began as a fully indigenous sodium nitrite and sodium nitrate manufacturer, before gradually expanding its product portfolio over the years. Currently, DNL enjoys a leading market position in most of its products in the domestic as well as global markets. DNL’s product portfolio consists of Basic Chemicals, Fine & Speciality Chemicals (FSC) and Performance Products. DNL’s manufacturing facilities are located at Nandesari and Dahej in Gujarat, Taloja and Roha in Maharashtra, as well as in Hyderabad. DNL’s growth has also been aided by strategic acquisitions of companies with complementary product lines. In November 2018, the company commissioned its phenol and acetone manufacturing plant at Dahej at a project cost of ~Rs. 1,400 crores through its wholly-owned subsidiary, Deepak Phenolics Limited. DNL infused equity of Rs. 560 crores in the project, 50% of which was in the form of non-cumulative optionally convertible redeemable preference shares.

A well-established chemical company on path of high growth phase.

Established player in the chemical intermediates industry:
The company has been manufacturing chemicals for nearly five decades. Over the years, the company has grown to become a market leader in the domestic market for inorganic intermediates (sodium nitrite), nitro toluenes and fuel additives. It is also among the top three global players for xylidines, cumidines and oximes.

Diversified product profile helps to diversify the risk related to a particular product segment:
The company started with a selected portfolio of low-value bulk chemicals like sodium nitrite and sodium nitrate, and further over the years it grew its product portfolio to include high-value speciality chemicals for multiple end-user applications. Currently, it sells 15-20 different chemical products to end-user industries. The company has also added pharma intermediaries and more agrochemical products to its portfolio over the years.

Greenfield expansion in phenol business acting as growth driver:
The company’s greenfield expansion plan at Dahej, Gujarat for manufacturing phenol and acetone has achieved operating levels of over 95% utilization. The phenol business has been able to operate profitably despite having lowest crack spreads in the recent past. The company is also incurring capex on development of downstream products for Acetone and same is expected to be commissioned by H1 CY20. All these measures should result in more sustained and profitable growth for the Company.

Technical

HIDDEN GEMS IN CHEMICAL SECTOR

Price: DEEPAK NITRITE got close in positive zone by 5.51% in today session. On the daily charts stock has bounce from the lower band of Bollinger Band (20, 2) with a positive bias, suggests that the stock is consolidating ahead of gaining momentum to resume its upwards journey. The stock trading above its long term moving averages like 200EMA at Rs.352. We expect the stock to continue its outperformance in the coming weeks. The stock has bounced from the support level with increased in volume which indicates the strength in the counter.

Indicator: The RSI 14 on daily chart is pegged at 45.61, reaffirming the bullishness in the counter which is likely to continue in the near term. The ADX (25.59) on the daily timeframe is also currently trading above the 25 mark suggesting that the stock is likely to witness more momentum in coming days.

Volume: Price and volume analysis plays an important part in determining overall strength or weakness in the stock. Price and volume pattern are moving in the same direction which reflects the true movements in the stock.

Conclusion: The recent price action suggests that strong hands are accumulating the stock at lower levels. Considering all the above data facts, we recommend to enter the stock at the current levels for the potential targets of Rs.492 levels. Any correction towards Rs.393 levels can be utilized to average the stock keeping strict stop loss placed below Rs.335 levels.

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