Target price: Rs 120.00
- Deepak Fertilisers and Petrochemicals Corporation Limited (DFPCL), manufactures anhydrous liquid ammonia. A consistent supply of its crucial raw materials, like natural gas, is assured through DFPCL’s own gas pipeline, direct from Bombay High gas fields.
- DFPL is the only domestic producer of isopropyl alcohol (IPA). IPA will significantly add to the revenues and is likely to contribute around 20 per cent of FY09 revenues.
- DFPL has been adding to its industrial chemicals portfolio consistently, and today it has a wide range of products that share the same production processes or raw materials. At present, the agriculture inputs business of DFPCL contributes around 30 per cent of its net revenues.
- DFPL currently holds a domestic market share of around 35 per cent. At the current market price, the stock is trading at a P/E of 8.1x and 6.1x and EV/EBITDA of 3.8x and 2.8x its FY07 and FY08 earnings, respectively.
- I initiate coverage with a Buy rating and a target price of Rs 120.
