Target: â¹2,565
CMP: â¹2206.95
We believe Deepak Nitriteâs MoU for investment of â¹14,000 crore (â¹12,500 crore for phenol/acetone downstream and INR 15bn for specialty) (to be completed by CY27) will put it in the league of chemical giants such as Covestro, Evonik, Huntsman, etc. With the help of its upcoming bulk chemicals (aniline, bisphenol A, polycarbonate, MMA) capacities, we believe Deepak will have an inherent advantage in the manufacturing of downstream specialty chemicals.
The company can, we think, completely substitute Indiaâs imports with its upcoming capacities (except for Aniline). As per our calculations, in FY29-30, Deepak will be able to generate â¹2,300-3,300 crore EBITDA from phenol/acetone downstream investment and â¹400-500 crore EBITDA from specialty investment.
This could translate to â¹3,800 crore additional EBITDA in FY30 on top of â¹1,900 crore EBITDA in FY26E, resulting in a likely EBITDA of â¹5,700 crore in FY30 (assuming successful commercialisation). Ascribing a 1-year forward 11-12x EV/EBITDA multiple, Deepakâs EV could be â¹63,000-67,000 crore by Marâ29.
Hence, we believe that investors can make 16-17 per cent CAGR returns over the next 5 years. Given the lack of clarity around the funding and timeline, we keep our estimates unchanged. We re-iterate Buy with an unchanged Marâ25 TP of â¹2,565/share.
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