Deepak Fertilisers: Buy for 19% upside in 1 year
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Set up in 1979 as an Ammonia manufacturer, DFPCL today is a publicly listed, multi-product Indian conglomerate with an annual turnover of over half a billion USD with a multi-product portfolio spanning industrial chemicals, bulk and specialty fertilizers, farming diagnostics and solutions, technical ammonium nitrate, mining services and consulting and value added real estate.
Company has developed a unique business model where synergies and diversities can be mutually inherent, build financial strength, generate free cash flow and invest in growth, both in India and globally. Now, company focused on global growth, drawing strengths from its existing product and plant synergies and adding new product lines, new plants and augmenting manufacturing capacities.
Company's expansion into new states and addition of manufacturing capacity to produce multiple grades of NPK will open new avenues for growth in future. The Company's continued innovations and initiatives in the space of speciality and water soluble fertilizers coincide with megatrend of water shortage and need of balanced fertilization for the country and are expected to bring positive results to the farming sector as well as company in coming years.
Supported by the new initiatives, improved government policies, normal monsoon, falling fertilizer prices, reduction in raw material prices, the fertilizer industry is poised to witness a multiplier effect in the coming years would definitely lead to improved profitability & margins in coming years.
Estimating the share price of the company as per P / E valuation, putting the estimated P/ E of FY18E at 16x the estimated EPS at Rs. 19.47, the estimated share price for next 1 year tenure turns around to be Rs. 313. Therefore, we recommend to BUY this script.
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Disclaimer: The author has taken due care and caution to compile and analyse the data. The opinions expressed above are only the views of the author, and not a recommendation to buy or sell. Neither the author nor IndiaNotes.com accept any liability whatsoever arising from the use of any of the above contents.
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