Deepak Fertilizers Q1FY11 Result Update: Reiterate a BUY, price target revised to Rs 195 : Ventura

Forest fertilizer bags at Hillatie in Juorkuna...

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Ventura in it’s Q1FY11 Result update states that

Deepak Fertilizers and Petrochemicals Limited (DFPCL) reported a 45.7 yoy growth in net sales to Rs 347.3 crore and a 34.3% growth in PAT to Rs 52.2 crore. The OPM margin grew an impressive 260 bps to 26.4%. Going forward we expect DFPCL to continue to maintain its growth on the back of improved capacity utilizations and the ramp up of production from its new TAN capacity expansion should significantly enhance profitability over the next couple of years.

DFPCL is currently quoting at a PE of 5.8 x its FY2012 earnings. Considering the ample availability of natural gas, price stability and ramping up of production across most business segments, we expect steady revenue and profitability growth over the coming years. We upgrade our price target to Rs 195 (target PE of 7.5x FY2012 earnings) representing an upside of 29.1% over a period 12-15 months.

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