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During a time when foreign investors have sold Indian equities worth over ₹1 lakh crore in the June quarter of FY23, they have increased their stake in chemical stock Deepak Nitrite.
As per the June quarter shareholding data, foreign investors have increased their stake to over 9 percent from 8.7 percent in the March quarter.
Meanwhile, Life Insurance Corporation of India (LIC) has also upped its stake to 4.64 percent in the June quarter from 3.64 percent earlier, the data showed, however, mutual funds have decreased their stake to 5.39 percent in June from 5.85 percent in the March quarter.
The stock has risen over 900 percent in the last 5 years, however, in the last 1 year, it has fallen 5 percent amid overall weak cues. In the June quarter, the scrip has tanked over 22 percent as against a 9 percent fall in benchmark indices.
Given the massive correction in the stock recently, experts believe that this has given a good buy opportunity to foreign investors. In the long term, the stock has good growth potential and robust fundamentals, they added.
Deepak Nitrite is one of India's leading chemical companies. The Company's segments include Basic Chemicals, Fine & Speciality Chemicals, Performance Products and Phenolics. Its products cater to several industries, such as colorants, petrochemicals, agrochemicals, rubber, pharmaceuticals, paper, textile and detergents. The company has five manufacturing plants and an R&D facility in India, and has recently commissioned its mega phenol-acetone project.
According to domestic brokerage house JM Financial, the company's phenol segments have been under pressure due to rising crude prices.
“While rising input costs have pressured margins, absolute profitability remains stable. We believe Deepak Nitrite would benefit from ongoing capex," said brokerage firm Edelweiss in a note.
Meanwhile, another brokerage house Ambit Capital also said that it remains positive on the future outlook of the company. "Despite the inflationary environment, management guided for ₹1500 crore of capex coming online over next 12-18 months. However, rising input prices and cautious margin outlook lead to cut in PAT estimates by 2 percent/3 percent for FY23/24E," it noted.
Key risks are project delays, sustained volatility in raw material prices, and macro headwinds in key geography like India, Ambit added.
JM Financial forecasts a net profit of ₹1,148.50 crore in FY23 and ₹1,355.30 crore in FY24 for the chemical stock. It also sees a return on invested capital of the firm growing from 31 percent in FY22 to 34 percent each in FY23 and FY24. The brokerage in June gave a ‘Buy’ rating to Deepak Nitrite with a target price of ₹2,760.
Meanwhile, YES Securities said that the June quarter earnings of Deepak Nitrite are likely to be impacted by weakness in phenol prices and margins. It expects a decline of 9.2 percent YoY in its net profit but a 23.70 percent YoY growth in revenue.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
