Prabhudas Lilladher upgrades rating on Deepak Fertilisers & Petrochemicals Corp to 'accumulate'

Deepak Fert & Petrochem
CMP: Rs 93.50
Target price: Rs 122

Prabhudas Lilladher has upgraded its rating on Deepak Fertilisers & Petrochemicals Corp to 'accumulate' from reduce, citing improved feedstock availability as the key trigger. "Deepak Fertilisers halted the production of methanol in H2FY09 due to a sharp fall in the price; however, the same has restarted in Q2FY10. The management believes that operating profit margin will be stable since benefit of improving chemical prices will be set off by improved raw material prices," the Prabhudas Liladher note to clients said.

"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. 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," the note added.