Deepak Nitrite Q1 Results Review - Agrochem Continues To Remain Soft: Prabhudas Lilladher

Prabhudas Lilladher Report

Deepak Nitrite Ltd. is facing sustained pressure on realisations as customers remain cautious and inventory destocking from China continues. Management anticipates a recovery only in the later part of Q3 FY25.

The Advance Intermediates segment saw 5% volume growth driven by performance products and fuel additives, but its Ebit margin dropped to 9% from 16% in Q1 FY24, down 700 basis points.

The Phenolics segment witnessed 37% YoY growth in topline, with some improvement in realization driving improvement in Ebitda, though revenue remained flat QoQ.

Near-term headwinds are expected to persist for Deepak Nitrite. The company plans to undertake new projects worth Rs140 billion, aiming for completion by the end of 2027. However, it will face cash constraints due to ongoing challenges in the agrochem sector, which accounts for 30-35% of its revenue.

We anticipate an earnings per share CAGR of ~7% over FY24-26E. Valuing the stock at 44 times price/earnings on FY26E EPS of Rs 63, we retain 'Reduce' rating with a target price of Rs 2,780.

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