A shares of this prominent chemical manufacturing company gained 7%, reaching a 52-week high of ₹2,620 per share on Monday after Morgan Stanley recommended a buy call on the stock with an upside of 22%.
At 12:25 p.m. on the National Stock Exchange, Deepak Nitrite Ltd. shares were trading at ₹2,545 per share, up ₹100.60 or 4.12 percent from the previous close price. The company has a market capitalization of ₹35,060 crore.
Deepak Nitrite Ltd manufactures Basic Intermediates, Fine & Speciality Chemicals, Performance Products, and Phenolics.
Deepak Nitrite (DNL) stands as a leading and reliable provider of chemical intermediates within India, With over 30 products, serving 56 applications, and a clientele exceeding 1000, it has emerged as the foremost producer of Phenol & Acetone in India since 2019.
Over the year, the company experienced a modest 0.9 percent rise in revenue, climbing from ₹1,991 crore in Q3FY23 to ₹2,009 crore in Q3FY24. However, during this timeframe, there was a slight decrease in net profit, dropping by 3.4 percent from ₹209 crore to ₹202 crore.
Deepak Nitrite Ltd. shares have gained 19 percent in the last six months and 31 percent in a year.
Morgan Stanley has upgraded the target price on Deepak Nitrite Ltd. from ₹1,625 to ₹ 2,985 per share, representing an upside of 22 percent from Friday’s close price of ₹2,444.40 per share.
Morgan Stanley predicts that Deepak Nitrite is poised to double its foundational earnings by 2028, driven by its strategic shift towards becoming a fully integrated phenolics producer.
The brokerage emphasized in its note that Deepak Nitrite’s upcoming and most substantial investment phase to date has the potential to catalyze a significant revaluation of the stock. This investment cycle, coupled with the stabilization of its core operations, improvements in efficiency, and a robust financial position, signifies a promising trajectory for the company.
Deepak Nitrite has embarked on a substantial multi-year investment plan totaling almost $1 billion, with projects already in progress. Following the launch of their new phenol capacity.
According to Morgan Stanley, the conditions appear favorable for Deepak Nitrite to replicate its past achievements, including capturing a substantial share of India’s phenol market, benefiting from favorable margin trends, and witnessing substantial growth in consensus estimates between the fiscal years 2020 and 2022.
The brokerage anticipates continued outperformance from Deepak Nitrite, citing its superior operational performance and impressive returns compared to industry peers. Additionally, they foresee further upside as the company’s new investments materialize and contribute to earnings growth.
Written by Omkar Chitnis
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