Buy Deepak Fertilizers - Motilal Oswal

Deepak Fertilizers (DFPC IN; Mkt Cap USD 289m, CMP Rs 149, Buy)

Higher chemical revenues on account of higher prices compensated for lower Fertilizer revenues. EBIT margins in the Chemicals segment continue to be around 30% (higher than 26% in 3QFY10).

The Ammonium Nitrate new plant should start contributing meaningfully in 1QFY12 quarter due to initial teething problems. We believe that volume and price growth in this product should more than compensate for lower fertilizer revenue estimates.

The stock has corrected sharply and could await scale-up of the new plant for a sustainable upswing. As the stock offers a good upside to our target price of Rs.200, we upgrade the stock to a BUY.

Source : Equity Bulls

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