Deepak Fertilisers & Petrochemicals Corp. Ltd. - PINC Result Review

Deepak Fertiliser's (DFPCL) Q1FY11 standalone results were better than our expectation as net sales grew by 44.6% YoY to Rs3.5bn (our estimate was Rs3.1bn) on the back of higher contribution from fertiliser segment. Higher capacity utilisation led OPM expansion of 255bps to 26.3%. Other income declined by 63% (lower dividend from subsidiary) and consequently, net profit grew by 34.5% to Rs522mn against our estimate of Rs428mn.

VALUATIONS AND RECOMMENDATION

We maintain our earning estimates for FY11 and FY12 and roll-forward our target price to FY12 estimates. Promising fertiliser policy and increased availability of raw materials along with ongoing capex augur well for DFPCL in future. At the CMP of Rs143, DFPCL is trading at a PER of 5.6x and EV/EBITDA of 3.5x FY12E. We reiterate our 'BUY' recommendation for DFPCL with an increased target price of Rs178 (7x FY12E EPS).

Source : Equity Bulls

Keywords