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Deepak Fertilisers &
Petrochemicals Corp Overweight
DPFE.BO, DFPC IN
Q1FY12 results in line; price hikes supporting margins
DFPC reported in-line Q1 numbers with sales growth +36% YoY driven by
new TAN plant and pricing improvement for Methanol/IPA. Although
management sounded caution on the current global environment, it remained
optimistic about the domestic market growth. DFPC has taken further price
hikes during the 1Q to pass on increasing costs and expects raw material
prices to remain stable going forward. Remain OW.
New TAN plant fully operational, new CNA plant announced.
Management noted that after initial delays, new TAN plant is now fully
operational with production of 33,224MT during 1QFY12. Management
expects production to ramp up and has guided to FY12 TAN production of
160,000T from the new plant. DFPC also announced setting up of a new
concentrated nitric acid (CNA) plant at Taloja with 46,200MTPA capacity.
This plant would be set up over the next 12 months with capex of
Rs250MM and would cater to drugs, paints and dyes industries.
Price hikes mitigating raw material cost pressure. Over last 12 months,
ammonia prices have increased 50%+ and gas prices are up ~21%. DFPC
has further hiked prices for IPA in 1QFY12 following prices hikes for TAN,
Methanol and IPA during Q4FY12. Management expects raw material
prices to remain stable or come down going forward (with crude coming
off), but did not rule out further price hikes to mitigate rising costs.
Q1FY12 results highlights. Revenues were up 36% YoY driven by strong
growth in chemicals (+44% YoY), esp. for TAN, Methanol and IPA.
EBITDA margins declined 270bps YoY (+200bps QoQ) to 23.9% on
account of higher raw material costs and lower margins from new TAN
plant. Net profits increased 23% YoY.
On track to meet FY12 estimates; remain OW. Based on Q1, DFPC
needs to grow net profits by 11% YoY for 9mFY12E to meet our EPS
estimates. DFPC has managed to sustain margins despite rising raw material
costs, pressures, which we view positively. DFPC is currently trading at 6.4x
FY12E, offering attractive valuations we believe. Remain OW with Mar-12
PT of Rs220 based on 8xFY13E P/E.
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
Q1FY12 results in line; price hikes supporting margins
DFPC reported in-line Q1 numbers with sales growth +36% YoY driven by
new TAN plant and pricing improvement for Methanol/IPA. Although
management sounded caution on the current global environment, it remained
optimistic about the domestic market growth. DFPC has taken further price
hikes during the 1Q to pass on increasing costs and expects raw material
prices to remain stable going forward. Remain OW.
New TAN plant fully operational, new CNA plant announced.
Management noted that after initial delays, new TAN plant is now fully
operational with production of 33,224MT during 1QFY12. Management
expects production to ramp up and has guided to FY12 TAN production of
160,000T from the new plant. DFPC also announced setting up of a new
concentrated nitric acid (CNA) plant at Taloja with 46,200MTPA capacity.
This plant would be set up over the next 12 months with capex of
Rs250MM and would cater to drugs, paints and dyes industries.
Price hikes mitigating raw material cost pressure. Over last 12 months,
ammonia prices have increased 50%+ and gas prices are up ~21%. DFPC
has further hiked prices for IPA in 1QFY12 following prices hikes for TAN,
Methanol and IPA during Q4FY12. Management expects raw material
prices to remain stable or come down going forward (with crude coming
off), but did not rule out further price hikes to mitigate rising costs.
Q1FY12 results highlights. Revenues were up 36% YoY driven by strong
growth in chemicals (+44% YoY), esp. for TAN, Methanol and IPA.
EBITDA margins declined 270bps YoY (+200bps QoQ) to 23.9% on
account of higher raw material costs and lower margins from new TAN
plant. Net profits increased 23% YoY.
On track to meet FY12 estimates; remain OW. Based on Q1, DFPC
needs to grow net profits by 11% YoY for 9mFY12E to meet our EPS
estimates. DFPC has managed to sustain margins despite rising raw material
costs, pressures, which we view positively. DFPC is currently trading at 6.4x
FY12E, offering attractive valuations we believe. Remain OW with Mar-12
PT of Rs220 based on 8xFY13E P/E.
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