Buy Deepak Fertilizers; target Rs 185: Emkay

We met with the management of Deepak Fertiliser – Mr. Somnath Patil – CFO and Mr. Debasish Banerjee - Vice President - Finance & Accounts.

- Ammonium Nitrate demand is witnessing sluggish growth due to lull in mining activities. However company is gaining market share by replacing imports.

- Recent media reports suggest Deepak is likely to be stopped supply of 0.18mmscmd gas from Reliance KG-D6 basin. However, management believes it is highly unlikely.

- Company may witness margin pressure due to recent currency depreciation since most of its raw materials are IPP linked. Our estimates already factors such margin pressure.

- We maintain our FY12/13 estimates at Rs 26.7 / 30.6 while with higher uncertainty, reduce target multiple from 8x to 6x (based on 5 years average) and reduce target price to Rs 185.

The stock was trading at Rs.120.60, down by Rs.2.45 or 1.99%. The stock hit an intraday high of Rs.123.50 and low of Rs.120.15.

The total traded quantity was 3976 compared to 2 week average of 7136.

Source : Equity Bulls

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