The document discusses Deepak Fertilisers Limited, an Indian company that produces fertilizers and chemicals. It notes that the company's TAN business performed well but other divisions like crop nutrition faced challenges from high raw material prices. The company's new greenfield plant in Dahej, Gujarat started commercial production and is expected to boost performance. The document recommends buying shares of Deepak Fertilisers Limited based on its expansion plans, new plant, and expected benefits from lower raw material prices.

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Company has developed a unique business model where synergies
and diversities can be mutually inherent, build financial strength, gen-
erate free cash flow and invest in growth, both in India and globally.
Company’s expansion into new states and addition of manufacturing
capacity to produce multiple grades of NPK will open new avenues
for growth in future. Further, its continued innovations and initiatives
in the space of specialty and water soluble fertilizers coincide with
megatrend of water shortage and need of balanced fertilization for the
country are expected to bring positive results to the farming sector as
well as company in coming years.
LEAD RATIONALE
BUY | CMP 140 | TARGET 168 | POTENTIAL UPSIDE 20%
03 JUNE 2019
POSITIONAL CALL
RUDRA SHARES &
STOCK BROKERS LTD
DEEPAK FERTILISERS LIMITED
Index Detail
Sensex 40267.62
Nifty 12088.55
Index S&P BSE 500
M.Cap (` in cr) 1234.80
Equity ( ` in cr) 88.20
52 wk H/L ` 313/104.40
Face Value ` 10
Div. Yield 2.14%
NSE Code DEEPAKFERT
BSE Code 500645
Stock Data
P/E 16.87
EV/EBITDA 7.96
P/BV 0.58
RONW(%) 3.43
Valuation Data FY 19 has been a perfect storm for DFPCL, wherein several un-
precedented circumstances have adversely impacted its performance.
Its TAN Business continued to perform well, whereas the Crop Nutri-
tion and its IPA businesses faced challenges on account of adverse
market conditions and an increase in raw material prices. However,
the softening in prices of major raw material are currently being wit-
nessed, and it is indeed expected to benefit in coming quarters.
An important milestone for company was the commencement of
commercial production for new Greenfield Plant at Dahej, Guja-
rat, which has been set up with an investment of about ` 550 crore,
has production capacities of 92 KTPA for CNA and 149 KTPA for
DNA, is expected to operate at full capacity and make a positive
impact from its first year of operation itself considering strong
customer demand.
Plant is strategically located in the vicinity of large consumers of CNA which produces Nitroaromat-
ics for specialty chemicals. The Company has tied up for about 70% of the CNA volumes to ensure
stable margins and regular off takes from this facility. Post addition of these new capacities, com-
pany’s market share is expected increase to 54% from 45% at present. Additionally, more ca-
pacity expansion projects are planned for ammonia (500000 MTPA), IPA (100000 MTPA), TAN
(376000 MTPA), and NPK fertilizer (200000 MTPA).

2. www.rudrashares.com 2
POSITIONAL CALL
RUDRA SHARES &
STOCK BROKERS LTD
DEEPAK FERTILISERS LIMITED
In addition, company is planning to invest up to $160 million in capital expenditure, and will
be backed by a $60 million investment package from IFC. The project will help company to
ramp up the production and distribution of specialty fertilizers in India
Key Highlights
 TAN business recorded robust revenue growth of 27% y-o-y in FY19 and 10% y-o-y in Q4
FY19, supported by increasing demand from the mining and infrastructure industries and higher
exports. TAN manufacturing plants are operating at full capacity utilization level.
 TAN achieved the highest sales volumes in FY19 of 506 KT, an increase of 20% y-o-y.
 During Q4, margins in IPA business were impacted by reduction in IPA import prices and vol-
umes were affected due to one-time technical issue in process reactor .
 Availability of phosphoric acid improved substantially in Q4 FY19. Higher global prices of
phosphoric acid and a lag in transferring its impact in the MRPs have led to the underperformance
of the segment in the quarter.
 NPK sales volume declined by 6.7% due to severe drought in last Rabi Season in Maharashtra.
Maintained leadership market share position with approx. 19% in the core market of Maharashtra
for NP /NPKs.
Particulars Q4 FY 19 Q4 FY 18 Variation %
Revenue 1293.76 1905 (32.09)
EBITDA 111.13 140.65 (20.99)
PBT 10.39 42.94 (75.80)
PAT 5.25 38.54 (86.38)
EPS 0.51 4.3 (88.14)
Key Financials (` in crores)
EV 4065.40
Net Worth 2141.62
BV 242.81
EPS(TTM) 8.30
Key Financial Data
` In crores except EPS

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POSITIONAL CALL
RUDRA SHARES &
STOCK BROKERS LTD
DEEPAK FERTILISERS LIMITED
Segment Highlights: Fertilizers
Segment Highlights: Chemicals
Overall Chemicals segment
reported revenues of `776
crores in Q4 FY19 as compared
to ` 1454 crores in Q4 FY18.
 Fall in prices of pharma sol-
vents, primarily arising out of
USA’s see-saw policies on Iran,
has led to downward valuation
of trading inventory .
 Chemical Trading business was consciously reduced from `817 crores Q4 FY18 to `146 crores
in Q4 FY19. The Company continued to consolidate its trading portfolio and focus on high-margin
products
 Opportunistic production of Methanol is undertaken as per availability of affordable gas and
pricing trend/outlook in the market. In Q4 FY19, margins of Methanol were not favorable to sup-
port production during the quarter .
Segment reported revenues of ` 512 crores
in Q4 FY19 as compared to ` 446 crores in
Q4 FY18.
Margins in Q4 FY19, compared to Q4
FY18, were impacted on account of the in-
crease in prices of phosphoric acid by
approx. 45%. Increase in raw material prices
couldn’t be passed through entirely and the
under-recovery in pricing continued during
the quarter.

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POSITIONAL CALL
RUDRA SHARES &
STOCK BROKERS LTD
DEEPAK FERTILISERS LIMITED
Share price chart has been taken for a period of past 1 year. There is a long term support at
the levels of `113 and short term resistance at level of `159; If it will cross this resistance,
then may reach to next resistance of `178 in short to medium term and thereafter reach to
52W/H @ 285-300.

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POSITIONAL CALL
RUDRA SHARES &
STOCK BROKERS LTD
DEEPAK FERTILISERS LIMITED

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POSITIONAL CALL
RUDRA SHARES &
STOCK BROKERS LTD
DEEPAK FERTILISERS LIMITED