Chemical manufacturer Deepak Nitrite has witnessed a strong rally in the last one year, driven by investors' renewed buying interest in chemical stocks and positive results for the last five consecutive quarters. The rise in stock price can also be attributed to commericialisation of its phenols and acetone plants in mid-FY19.
The stock has surged 161% from levels of ₹1,011.60 apiece on January 18, 2021, to an intraday high of ₹2,672.40 today. Similarly, in the last 5 years, this multibagger share has delivered a whopping 2,521% returns to its shareholders. In comparison, the benchmark index BSE Sensex has gained 26% in the last one year and 126% over the past five years.
If a person had invested ₹1 lakh in this multibagger stock on January 18, 2021, it would have become ₹2.64 lakh at present. Similarly, an investment of ₹1 lakh in Deepak Nitrite at the beginning of 2017 would have grown to around ₹26.5 lakh in five years.
The midcap stock seemed to have lost some steam in the near term, growing 35% in the last six-month period, 16% in one month, and nearly 2% over the last five sessions. The market capitalisation of Deepak Nitrite stood at ₹36,098 crore as of January 17, 2022.
On Monday, Deepak Nitrite shares have fallen after three sessions of consecutive gain and declined as much as 1.1% to hit an intraday low of ₹2,631. The stock was trading nearly 13% lower than its 52-week high of ₹3,020 touched on November 19, 2021. The share had hit its 52-week low of ₹928 on January 28, 2021.
According to stock research platform Markets Mojo, the stock is technically in a ‘bullish’ range with a strong long-term fundamental strength. The stock was trading higher than 5-day, 20-day, 50-day, 100-day, and 200-day moving averages.
The stock has witnessed a drop in investor participation with delivery volume falling by 44% to 1.31 lakh on January 14, against 5-day average delivery volume, as per the research platform.
Deepak Nitrite delivered positive results for last 5 quarters
The company has consistently reported robust earnings and has declared positive results for the last five consecutive quarters. For the quarter ended September 30, 2021, the chemical manufacturer had reported a 49.4% growth in consolidated net profit at ₹254.34 crore as compared to ₹170.19 crore posted in the year-ago period. Net sales rose by 70.3% to ₹,681.35 crore in Q2 FY22 over ₹991 crore in Q2 FY21.
In the financial year ended March 31, 2021, Deepak Nitrite posted a net profit of ₹776 crore as compared to ₹611 crore in FY20, up by 27% on the back of higher revenue, more efficient operations and lower interest cost. Revenues stood at ₹4,382 crore as compared to ₹4,265 crore in FY20, up 3% amid accretive performance of the phenolics and that of the fine and specialty chemicals (FSC) segment.
Here’s what brokerage has to say about this chemical stock:
ICICI Securities: The brokerage has recommended a ‘Buy’ rating on the chemical stock with a target price of ₹3,010 per share and stop loss of ₹2,418 with a time frame of up to 3 months.
“The chemical stocks are witnessing renewed buying interest after a shallow retracement of the last three months. We expect the chemical space to continue with its primary uptrend. Deepak Nitrite is our preferred pick within the chemical stocks as the stock is seen rebounding taking support at the lower band of the rising channel in place since March 2020 and the rising 20 weeks EMA (currently placed at 2345) thus offers fresh entry opportunity with a favourable risk reward set up,” the brokerage said in a report dated January 12, 2022.
HDFC Securities: The brokerage has also recommended a buy call on Deepak Nitrite with targets of ₹2662-2855 and stop loss of ₹2,280 with a time horizon of 1-3 months.
“Technical indicators are giving positive signals as the stock is trading above the 20 day and 50 day SMA. Daily momentum indicators like the 14-day RSI have bounced back from oversold levels and are in rising mode now. This augurs well for the uptrend to continue," the brokerage firm said in its report.