Stock Review: Deepak Fertilizers

Deepak Fertilizers are the largest industrial chemical makers from the natural gas. The best part about the company is that they have been very smart, whenever they have the higher realization in their main products, like methanol and ammonium nitrate they move making into those products.

Their performance for FY10 has not been much into the production of fertilizer. But, with the NBS pricing coming for complex fertilizers they had small contribution from the fertilizers on the top line as well as in the bottom-line.

But, going forward considering the product profile and the margins they enjoy in their industrial chemical products they will be focusing more on these kind of products rather than fertilizers. But, even if their focus remains partly on fertilizers they should do quite well.

Taking their FY11 performance, the company has posted growth of about 22% on topline and about 33% in bottom-line. The company has also completed expansion of many products in FY11 at the end of FY11.

FY12 is likely to see the major contributions coming in from those products. Maybe growth of 22% in topline and 33% in bottomline is likely to surpass in FY12. I won't be surprised to see a bottomline growth of about 40% with topline growth close to about 25-30%.

So taking all this into consideration, the stock has the potential to move to about Rs 220 in the next six- eight months time considering their product profile.