Interesting facts about Deepak Nitrite Limited

 

Interesting facts about Deepak Nitrite Limited

 

Financial strength:

Sector: Chemicals            Index: NIFTY 500               Market cap: ₹33,374 Cr

Income: ₹820 Cr               Sales: ₹7,462 Cr                 P/E: 42

Debt/Equity: 1%

 

Business Description:

Deepak Nitrite Limited is an India-based company, which is engaged in manufacturing and trading of chemicals. The Company operates into two segments: Advanced Intermediates and Phenolics.

Its Advanced Intermediates segment offers sodium nitrite, sodium nitrate, nitro toluidines, fuel additives, nitrosyl sulphuric acid, xylidines, oximes, cumidines, specialty agrochemicals, optical brightening agent (OBA), diamino stilbene disulfonic acid (DASDA). Its Phenolics segment offers cumene, phenol, acetone, isopropyl alcohol, ammonium sulfate (AMS).

The Company’s products cater to several industries, such as colorants, rubber chemicals, explosives, dyes, pigments, food colors, pharmaceuticals, diesel blending, agrochemicals, glass, personal care, paper, detergents and textiles, laminates, ply, adhesive, paints, auto, pharmaceuticals, plastics, and others. The Company’s manufacturing facilities are located at Nandesari, Dahej (Gujarat), Roha, Taloja (Maharashtra) and Hyderabad (Telangana).

 

Financial Highlights:

• The company reported standalone net profit of Rs 157.42 crore for the quarter ended September 30, 2023 as compared to Rs 158.53 crore in the same period last year, registering a year-on-year decline of 0.70 per cent.
• Net revenue of the company declined marginally by 2.15 per cent at Rs 670.59 crore in July-September quarter of this fiscal as against Rs 685.30 crore in the corresponding period last year.
• During July-September quarter, operating expenses increased by 1.38 per cent to Rs 552.83 crore from Rs 545.29 crore in year ago period. Other Income grew by 26.72 per cent at Rs 89.36 crore versus (Sep’22 Rs 70.52 crore).
• Operating Profit slipped by 15.89 per cent to Rs 117.76 crore as against Rs 140.01 crore in the year ago period, while Operating Profit Margin (OPM) contracted year-on-year to 14.05 per cent in September quarter.
• Interest declined by 12.50 per cent y-o-y to Rs 0.28 crore, while Taxation decreased by 13.89 per cent at Rs 28.83 crore (Sep’22 Rs 33.48 crore).

 

 

Performance overview & other highlights:

• The Company weathered the persistent negative impact of global destocking and achieved volume gains on both year-on-year and quarter-on-quarter basis.
• Focused efforts towards capitalizing on byproduct valorisation opportunities.
• Prioritizing import substitution and increasing domestic contributions has partially mitigated the impact of demand challenges in the EU and USA; India continues to be in a sweet spot due to energy crisis in EU.
• The Company remains debt-free, with a net worth of ₹4,342 Cr.
• DNL has cumulatively invested ₹ 599.50 Cr in DCTL (wholly owned subsidiary), out of which ₹ 100 Cr was invested in Q2 FY24.
• DNL invested approx. ₹ 17 Cr (USD 2 Mn) in equity of Deepak Oman Industries; it holds 32% stake as part financing equity to set up SNI/ SNA project at Oman.

 

TECHNICAL OUTLOOK:

Recommendation: Buy

CMP: 2447.95

Stop Loss: 1875

Target: 3875 – 3900

Timeframe: 5 to 6 months

 

WEEKLY CHART:

Stock was in long term consolidation pattern on weekly timeframe. Consolidation pattern was in the form of “Triangle pattern” marked with (red lines) A-B-C-D-E on the chart.

Price action of last two to three weeks has started building positive momentum, which is evident from momentum oscillator “Relative Strength Index” (RSI) below the chart, as it has started trading above the previous peaks and currently sustaining above 60 level on weekly chart.

Going forward, if prices manage to take some breather and retraces back near 2300 – 2200 zone then it would be good accumulation area.

Stop loss can be placed at 1875 on the lower side and one can expect target of 3875 – 3900 levels on higher side in coming 5 to 6 months.

 

Conclusion:

Deepak Nitrite has an operating revenue of Rs. 7,498.81 Cr. on a trailing 12-month basis. An annual revenue growth of 17% is outstanding, Pre-tax margin of 14% is healthy, ROE of 20% is exceptional. The company has a reasonable debt to equity of 1%, which signals a healthy balance sheet.

The stock from a technical standpoint is comfortably placed above its key moving averages, around 12% and 19% from 50DMA and 200DMA. It has recently broken out of a base in its weekly chart which suggest build-up in price momentum.