Prabhudas Lilladher upgrades Deepak Fertilisers to 'Accumulate'

MUMBAI: Prabhudas Lilladher has turned bullish on Deepak Fertilisers & Petrochemicals (DFPC). It has upgraded its rating on the stock from reduce to 'Accumulate' and expects the scrip to hit a target price of Rs 122 per share.

In its company update report, the brokerage has taken into consideration availability of the feedstock for the company to run its chemical plants.

"DFPC has tied up with GAIL for 90% of their gas requirement (including APM gas) at present. Improved gas availability leads to better capacity utilisation of chemicals as well as fertiliser plant. Company's fertiliser plant operated at 25% in FY09 due to shortage of gas and phosphoric acid. On the back of an improved feedstock scenario, we have taken 60% and 80% utilisation level for fertiliser plant in our FY10E and FY11E estimates, respectively.

Improved feedstock availability has eased our concerns on the stock. Hence, we have upgraded our earnings by 7.2% and 8.2% for FY10E and FY11E, respectively due to better capacity utilisation of plants. Also, we are upgrading our rating from 'Reduce' to 'Accumulate' on the stock, with a revised target price of Rs 122 (i.e. 7x of FY11E EPS)," the report said.