Deepak Nitrite Q3 Results Review - Subdued Performance In AI Segment Leads To Miss: Motilal Oswal

Motilal Oswal Report

Deepak Nitrite Ltd. delivered a miss in Q3 FY24, led by a weaker than expected performance in advance intermediate. The quarter saw persistent pricing pressure by Chinese suppliers in chemical intermediates. Ebitda at Rs 3 billion missed our estimate by 15%, while profit after tax stood at Rs 2 billion versus our estimate of Rs 2.5 billion. Margin also declined YoY due to the AI segment.

The management highlighted that global consumption trends have been hit as the chemical industry continued to face headwinds in Q3. The AI segment’s weak performance was mainly attributed to the lack of demand in the agrochem, textiles, and dyes and pigments sectors; however, demand was healthy from the construction, infrastructure and home care segments.

Due to the underperformance in Q3 FY24, we have cut our Ebitda/earnings per share estimates by 6%/9% for FY24 while keeping our FY25/FY26 estimates broadly unchanged.

The stock trades at ~30x FY25E EPS of Rs 77 and at ~20 times FY25E enterprise value/Ebitda. We reiterate our Neutral rating, valuing the stock at 25 times Dec-25E EPS to arrive at our target price of Rs 2,185.

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