Deepak Nitrite Targeted for Price Appreciation to Rs 1495: Prabhudas Lilladher

Deepak Nitrite's Q4FY26 Performance: Key Takeaways and Outlook

Deepak Nitrite's Q4FY26 revenue stood at Rs21.3 billion, marking a growth of 7.4% quarter-over-quarter (QoQ), albeit a decline of 2.7% year-over-year (YoY). A significant contributor to the topline was an incentive of Rs684 million for the phenolics segment from the Government of Gujarat, a decrease from the Rs1,612 million received in Q4FY25. The Advanced Intermediates segment reported sales growth of 8% YoY as well as QoQ, driven by steady volumes and favorable pricing, resulting in a 240 basis points (bps) sequential improvement in margins.

The Phenolics segment witnessed 7% sequential growth, although revenue declined by 7% YoY. However, EBIT margins improved significantly due to a substantial increase in spreads during the quarter. The company's projects, including the MIBK/MIBC initiative, are expected to be commissioned by early Q2FY27, while the nitric acid plant commissioned in December 2025 operated at 45% utilization during the quarter. Additionally, the dismantling of the polycarbonate plant in Germany is underway, with the project timeline revised to June 2028 from the earlier guidance of December 2027.

Outlook and Recommendations

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Deepak Nitrite continues to undertake growth initiatives, primarily focused on the Phenolics segment. However, based on analysis, phenol-acetone spreads have started declining on a week-on-week basis, which could lead to some margin compression going forward. The stock is currently trading at approximately 34x FY28 EPS. Our valuation estimates place the stock at 29x FY28 EPS, and we maintain a 'REDUCE' rating with a target price of Rs1,497.