CRISIL has revised its outlook on Deepak Nitrite (DNL)'s bank facilities worth Rs 750 crore to 'positive' from 'stable' while reaffirming the rating at 'CRISIL AA-'.
The short term rating has been reaffirmed at 'CRISIL A1+'. The rating revision follows the DNL group's improved business profile, supported by better product diversity through ramp up of its phenol and isopropyl alcohol (IPA) business, as well as sustained growth in performance of its key business segments- basic chemical (BC) and fine and specialty chemical (FSC). Further, its operating profitability has also registered healthy improvement to approximately 25% in fiscal 2020, and is expected to sustain at over 20% over the medium term.
The ratings agency said that DNL's business risk profile will continue to benefit from market leadership across product segments and healthy operating efficiency over the medium term. Healthy cash accruals, moderate capex intensity and progressive debt repayment will continue to drive improvement in financial risk profile, it added.
CRISIL added that significant and sustained improvement in scale of operations and sustenance of profitability resulting in net cash accruals over Rs 500 crore on sustained basis could lead to ratings upgrade. However, sharp deterioration in operating performance leading to accruals of lower than Rs 300 crore could lead to a rating downgrade.
Deepak Nitrite is well diversified with presence across three segments viz. basic chemicals (BC), fine and specialty chemicals (FSC) and performance products (PP). The group has recently ventured into phenol-acetone segment through its 100% subsidiary Deepak Phenolics.
The chemical maker posted a 24.8% drop in consolidated net profit to Rs 98.95 crore in Q1 June 2020 from Rs 131.61 crore in Q1 June 2019. Net sales in the June quarter stood at Rs 674.49 crore, falling 36% from Rs 1050.98 crore recorded in the same period last year.
The scrip rose 0.17% to Rs 858.20. It traded in the range of 843.95 and 866.85 in early trade.
On the technical front, the stock's RSI (relative strength index) stood 73.034. The RSI oscillates between zero and 100. Traditionally the RSI is considered overbought when above 70 and oversold when below 30.
The stock is currently trading above its 50-day, 100-day and 200-day simple moving average (SMA) placed at 646.88, 572.82 and 490.97, respectively.
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