Deepak Fertilisers up 5%, hits new high; stock gains 29% post strong Q1 nos

The company reported a 3.3-fold jump in Q1 net profit at Rs 435.66 crore, following which the stock has rallied smartly in the last seven trading sessions.

Shares of Deepak Fertilisers and Petrochemicals Corporation registered a new life-time high at Rs 838.95, up 5 per cent in Thursday's intra-day trade on the BSE. The stock has rallied nearly 29 per cent in the last seven trading sessions after the company reported a solid set of June quarter results.

At 11:17 AM, the stock was at the day's high with trades of around 38,0000 shares on the BSE. Meanwhile, the S&P BSE Sensex was up 0.1 per cent, and had gained a litte over 6 per cent in the last seven days.

The stock has been a strong outperformer so far this calendar year, gaining a whopping 125 per cent so far. In comparison, the S&P BSE Sensex was up merely 0.3 per cent.

According to a release issued by Deepak Fertilisers, the company's Q1 net profit grew 3.3-fold to Rs 435.66 crore in the quarter ended June 2022 when compared with Rs 130.63 crore in the corresponding quarter a year ago. Total income jumped 59.5 per cent YoY to Rs 3,042.28 crore in the same period.

The chemicals Segment contributed about 87 per cent of the total segment profits. Chemicals revenues doubled to Rs 1,771 crore and margins expanded from 19 per cent in Q1FY22 to 41 per cent in Q1FY23. Furhter, operating EBITDA margins increased from 15.2 per cent to 24.3 per cent. 

"While we increase FY23 EPS by around 53%, we raise our FY24-25 EPS targets by around 2% assuming a correction in spreads. Our SOTP-based Sep-23 target price (rolled forward from Jun-23) moves up to Rs 1,005. At only 10x FY24ii P/E, we continue to find the stock undervalued. Commissioning of the ammonia and TAN projects will drive medium-term growth," wrote analysts at IIFL Securities wrote in a recent note.

Meanwhile, ICRA has upgraded DFPCL and STL “Long Term” Credit Rating to AA- with Stable outlook. “Short Term” Credit Rating is also affirmed to A1+ (Highest Rating), the release added.

Commenting on the Q1 performance, Sailesh C Mehta, chairman & managing director of the company said, we have continued our strong operational performance in Q1 FY2023 on the back of improved margins in Chemical segment This persistent business performance is a result of our long-term strategic initiatives, strong market positioning and favourable market conditions.

Going forward, the company is confident of maintaining strong market share in our key products across the segments. The strong demand outlook of our key products coupled with differentiated product portfolio should support business growth and profitability in the long term.

The long-term growth is expected to be underpinned by change in product mix, head room availability of additional capacities emerging from better operational management and debottlenecking along with greenfield expansions. he added.