This article can explore the possibility of Deepak Nitrite Limited as a Multibagger 2021 Stock based on Value Investing principles. Deepak Nitrite Limited is an outstanding chemical manufacturing company incorporated and based in India.
| Website | https://www.godeepak.com/ |
| CMP | 1,625.00 INR |
About Deepak Nitrite Limited
Deepak Nitrite Limited’s Basic Chemicals factory unit produces intermediates for dyes and pigments rubber fuel additives pharmaceutical agrochemicals and explosives. The company’s Fine and Speciality Chemicals (FSC) are knowledge-based technoscientific molecules that are produced from tough process competency and technical skills in supervising potentially hazardous reactions. The company’s Performance Products (PP) business segment produces chemicals that are reckoned for the particular characteristic they present to the end merchandise. Deepak Nitrite is the only fully integrated producer of Optical Brighteners (OBAs) which is reserve integrated up to the feedstock of toluene.
Deepak Nitrite Limited was consolidated in the year June 06th 1970. In the year 1984-1985, the business sprang to produce 3000 TPA concentrated nitric acid and in the same year, the company incorporated its hexamine manufactory. Throughout the year the company gained 31 acres of land in village Kareli in District Bharuch. While in the year 1986-1987 the company began the making of new items namely Guanidine Nitrate and Hydroxylamine Sulphate.
During the year 1999-2000, the corporation gained 68.76 % equity capital of Aryan Pesticides Ltd (APL). In the same year, the company increased the established capacity of Nitro Aromatics from 16500 MTS to 19000 MTS. During the year 2000-2001, Deepak Nitrite Limited’s Taloja Chemical department commissioned the second stream of hydrogenation thereby providing an additional capacity. Also, the business developed the installed capacity of Aromatics Amines from 4500 MTS to 6600 MTS. During the year 2003-2004 Aryan Pesticides Ltd amalgamated with Deepak Nitrite Limited with effect from 31 March 2004.
About Product Brands
Deepak Nitrite produces chemical intermediates to attend the domestic and international market with high-quality commodities made in a systematic and sustainable manner.
The company has three businesses:
- Basic chemicals: Dyes and pigments.
- Fine and speciality chemicals: Caters to agrochemicals, pharmaceuticals and personal care product markets.
- Performance Products: Optical brightening and fluorescent whitening agents—used in paper, textiles and detergent manufacturing.
Deepak Nitrite Limited commissioned the plant at Dahej, Gujarat, in November last year that can produce up to 200,000 tonnes of phenol and nearly 120,000 tonnes of acetone, a by-product, yearly. The capacity utilisation is already at higher than 80 per cent, Chairman and Managing Director Deepak Mehta announced during the earnings call for the third-quarter outcomes. It examined to have 100 per cent utilisation
Warren Buffet, Value & Growth Checklist
| Capitalization | ₹ 22,179 Cr. |  |
| Sales Increasing past 3 Year | Yes, 45.6 % |  |
| Profit Increasing past 3 Year | Yes,137 % | |
| Durable Competitive Advantage | Yes | |
| PE Ratio | 34.1 |  |
| PB Ratio | 12.2 | |
| Debt Equity Ratio | 0.38 | |
| Intrinsic Value Discount | 83.24% | |
| Promoter Holding & Increase | 45.7 % slight increase | |
| Multibagger Returns | 300-500% 5 Year | |
Business and Industry Analysis
Deepak Nitrite Limited has 70% market share in Sodium Nitrite, Sodium Nitrate & Nitro Toluenes in India.
The Company is among Top 3 global producers of Xyloidines, Cumin des and Oximes.
Deepak Nitrite has an audience in over 30 countries all over the globe and also has about 70% Market cut in Sodium Nitrite & Nitro Toluenes in India. They are one of the most extensive yielders of Phenol and Acetone. The company has invested 1700cr in all its augmentation in setting Greenfield projects since 2016. The corporation is also Top 3 manufacturers in the world for Xylidines, cumin des & oximes.
Drawn an investment of about ₹400 cr for improving its solvent isopropyl alcohol (IPA) capacity at its Dahej facility, a power plant, though risks to cut in CAPEX, looms large on account of perceived market stress due to Covid 2019. It had recently also secured 125 acres of industrial land in Dahej , Gujurat near Baroda at a price of approximately ₹100 crore
Deepak Nitrite Limited has five factories located at Dahej, Nandesari, Roha, Taloja and Hyderabad.then It has 100+ commodities serving in numerous industries and 56 Applications recommended worldwide
Currently, factories are operating at 20% to 40% of the potential It would take 3 to 4 months to reach 80% to 90% Utilization. In short term, there can be some fall in stock prices. But once everything affected Due to covid 2019 gets settled, There is no tracking back for the company.
Deepak Nitrite is ramping up capacities of other chemicals including sodium nitrite, nitro-toluenes and agrochemical intermediates, in its standalone business.
Plans for backwards-integration— producing products instead of outsourcing —in some segments could help provide growth even during price correction.
Positives
- In the last 10 years, the business has emerged from smallcap to Midcap And in the succeeding 10 years, it can reconstruct itself from Midcap to Largecap.
- China’s crackdown on befouling units caused an interruption in accumulation supply, serving Deepak Nitrite’s revenue growth as it shifted the centre to the home market.
- The new phenol-acetone manufactory will thrust the business into the next growth period.
- Cash flows from this trade would aid the expansion of downstream derivatives and speciality chemicals business.
- Capacity addition in standalone business and expansion into downstream derivatives of the phenol-acetone industry provides extensive growth possibilities.
- The market for Phenol has been expanding in India at a rate of 9-10 per annually. There is also an improvement in the overseas market too. parts to the shutting down of factories in the US.
Negatives
- Fluctuating prices of products: As per changes in the prices of raw materials can directly affect the prices of the products in the company’s line-up.
- Higher raw material costs: Due to the company’s dependency on outsourcing raw materials they don’t have any control over the fluctuations in prices of the raw materials.
- Competition in the Industry: It is very hard to compete in the chemical industry for the global market due to the presence of competition from the Chinese market
- Currency fluctuations and regulatory changes: Because the company is marketing its products for the global market the fluctuation in the currency of each country can cause a downfall in the performance of sales
SUMMARY
This company can be a 5X Multibagger in the next 5 Years. Please refer to the Summary for Subscription & Updates.