Deepak Nitrite Ltd. aims to become the largest player in solvents, with a play on import substitution. It has already announced its foray into MIBK (40 kilo tonnes per annum), Methyl Isobutyl Carbinol (8 ktpa), and polycarbonate compounding. These projects are taking shape and would be commissioned as per the plan.
Deepak Nitrite is aggressively pursuing both backward and forward integration projects in order to de-risk its business model and expand its product portfolio. However, its entire product portfolio consists of commodities. The current valuation appears expensive.
The stock trades at ~24x FY25E earnings per share of Rs 85.2 and at ~17 times FY25E enterprise value/Ebitda.
We reiterate our ‘Neutral’ rating, valuing the stock at 25x FY25E EPS to arrive at a target price of Rs 2,130.