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Deepak Fertilisers & Petrochemicals Corp
Overweight
DPFE.BO, DFPC IN
FY11 Beats Estimates on Higher Realizations, Increase PT to Rs220
DFPC’s FY11 profits are 17% ahead of our estimates, surprising on the
upside on account of aggressive price hikes which mitigated raw material cost
pressures. In addition, increase in fertilizer subsidy (effective 1st April ’11)
should aid margins. New 300,000MT TAN plant has become operational and
management have indicated that production will be ramped up to 70%
utilization level by end FY12. We increase our earnings estimates for FY12EFY13E
and increase PT to Rs220.Maintain OW.
• Price hikes mitigating raw material cost pressure: DFPC have hiked
prices to mitigate raw material cost pressures. Specifically, DFPC have
raised prices for IPA (+20% YoY) and Methanol (+28% YoY). However,
there has been some pricing pressure on TAN (-2% yoy), though there are
signs of easing as DFPC have raised TAN prices by Rs2000/T in Jan-11.
Further, govt. has raised NBS subsidy for phosphate fertilisers from
~Rs12000/T to ~Rs14500/T beginning April 1, which should aid margins
going forward.
• New TAN plant to ramp up in FY12: Management have indicated that
production from new 300,000MT TAN plant would remain subdued in
1QFY12 at 35,000MT as it is still being stabilized. However, management
indicated that utilization rate will pick up to 70% by end FY12 and to 90%
in FY13E.
• FY11 results 17% ahead of our estimates: FY11 revenues increased 23%
YoY driven by strong realisations for Methanol, IPA and ANP; EBITDA
margin was up 10bps at 22.1%, while net profits increased 36% YoY to
Rs.1.9B, 17% ahead of our estimates. Accordingly, we raise our FY12-FY13
estimates by 3%-6% to factor in better realizations.
• Price target, valuation, key risks: Our new Mar-12 TP of Rs220 is based
on 8x FY13E P/E, in-line with domestic peer group average. Key risks to
our rating and price target are disruption in supply of key raw materials of
gas and ammonia, change in government regulations on fertiliser policy or
on explosives and cheaper imports of TAN to India.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Deepak Fertilisers & Petrochemicals Corp
Overweight
DPFE.BO, DFPC IN
FY11 Beats Estimates on Higher Realizations, Increase PT to Rs220
DFPC’s FY11 profits are 17% ahead of our estimates, surprising on the
upside on account of aggressive price hikes which mitigated raw material cost
pressures. In addition, increase in fertilizer subsidy (effective 1st April ’11)
should aid margins. New 300,000MT TAN plant has become operational and
management have indicated that production will be ramped up to 70%
utilization level by end FY12. We increase our earnings estimates for FY12EFY13E
and increase PT to Rs220.Maintain OW.
• Price hikes mitigating raw material cost pressure: DFPC have hiked
prices to mitigate raw material cost pressures. Specifically, DFPC have
raised prices for IPA (+20% YoY) and Methanol (+28% YoY). However,
there has been some pricing pressure on TAN (-2% yoy), though there are
signs of easing as DFPC have raised TAN prices by Rs2000/T in Jan-11.
Further, govt. has raised NBS subsidy for phosphate fertilisers from
~Rs12000/T to ~Rs14500/T beginning April 1, which should aid margins
going forward.
• New TAN plant to ramp up in FY12: Management have indicated that
production from new 300,000MT TAN plant would remain subdued in
1QFY12 at 35,000MT as it is still being stabilized. However, management
indicated that utilization rate will pick up to 70% by end FY12 and to 90%
in FY13E.
• FY11 results 17% ahead of our estimates: FY11 revenues increased 23%
YoY driven by strong realisations for Methanol, IPA and ANP; EBITDA
margin was up 10bps at 22.1%, while net profits increased 36% YoY to
Rs.1.9B, 17% ahead of our estimates. Accordingly, we raise our FY12-FY13
estimates by 3%-6% to factor in better realizations.
• Price target, valuation, key risks: Our new Mar-12 TP of Rs220 is based
on 8x FY13E P/E, in-line with domestic peer group average. Key risks to
our rating and price target are disruption in supply of key raw materials of
gas and ammonia, change in government regulations on fertiliser policy or
on explosives and cheaper imports of TAN to India.
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