Hem Securities recommend well diversified oil & gas company for appreciation of ~33%

Hem Securities | July 17, 2010, midnight


  • Deep Industries Limited (DIL) is well diversified Oil & Gas Company serving the industry since 1991 with business interest in Air and Gas Compression, Work Over, Drilling, Gas Dehydration and Oil & Gas Exploration and Production. DIL is the first Company in India to provide high pressure Air and Gas compression and Gas Dehydration Services on charter hire basis. DIL is the largest Natural Gas Compression services provider and is the largest Gas Dehydration Service provider in India.
  • The company has registered decent results for the quarter ending September 2016. The standalone revenues grew by whopping 97.15% to Rs.67.50 crores vs. Rs.34.24 cr. in the year ago quarter. Operating profit grew at Rs.26.89 crores as against Rs.15.49 crores in the like quarter last year; representing growth of 73.59%. The adjusted net profit doubled at Rs.16.77 crore as against Rs.8.01 crore, depicting a sharp growth of ~109% y-o-y. Similarly, both the margins of the company witnessed a whopping growth on a yearly basis. Operating profit margin stood at 60.16% vs 54.76% and Net profit margin stood at 24.84% vs 23.39%.
  • Deep industries enjoy first mover advantage in Gas compression and dehydration in India. It also has long term association with US based vendors providing competitive edge to it.
  • The company has initiated investment in one of the blocks in North Karnapura under Exploration and Production division and revenues are expected to begin by 2018-19.


Valuation


Deep industries enjoy leadership position in gas compression and dehydration business. With robust order book, well diversified business portfolio, increasing market share, wide client base and strong operating metrics; Deep Industries growth prospects looks promising. We believe the company is trading at an attractive valuation at 15.42x and 11.85x of consolidated FY17EPS of Rs.19.87 and FY18EPS of Rs.25.86. We initiate a ’BUY’ on the stock with a target price of Rs.410 (appreciation of about 33%) with the medium to long term investment horizon.

 

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