Motilal Oswal Financial Services

1QFY12 Results Update

SECTOR: CHEMICALS/FERTILIZERS

Deepak Fertilisers

STOCK INFO.

BLOOMBERG

BSE Sensex: 16,858

S&P CNX: 5,073

DFPC.IN

REUTERS CODE

10 August 2011

Previous Recommendation: Buy

YEAR

END

SALES APAT ADJ.EPS

(Rs Cr)

172

184

222

(

)

17.0

20.5

25.2

EPS

Gr.(%)

(X)

9.3

7.7

6.3

P/BV

(X)

1.5

1.3

1.1

EV/

EBITDA(X)

5.5

5.1

3.8

DIV. YLD ROE

(%)

2.8

3.1

3.5

(%)

17.3

18.2

19.3

BUY

Rs160

RoCE

(%)

17.7

16.6

19.2

DPFE.BO

Shares Outstanding (cr)

52-W H/L Range (Rs)

1/6/12 Rel. Perf (%)

Market Cap. (Rs cr)

Market Cap. (US$ m)

8.8

212/145

8/8/15

1,411

312

FY10A 1,288

FY11A 1,562

FY12E

1,973

Results - Brief Overview

Deepak Fertilizers profits were above estimates with Revenue up 35% on account of 44% rise in chemical sales.

Higher prices and volume growth in TAN from the new plant (33,000 tonne production) contributed to the growth in

Chemical sales. The New TAN plant has lower margins than the old plant due to bought-out inputs. Higher input

costs restricted EBIT growth for Chemicals division at 21%.

The Fertilizer division has shown a 14% rise in revenues with 53% growth in profits on account of enhanced margins.

Realty division has seen a increased losses with

Rs1.36

cr of prior period property tax paid during the current quarter.

This division could see improved performance after the entire restructuring activity is completed.

Marginal increase in depreciation Y/Y and a lower tax rate at 27% vs 29% have countered the drop in other income

to help post a 22% rise in PAT.

We have tinkered with our numbers to account for deviations from our expectations

Cr. (Consolidated)

Revenue

Expenditure

EBITDA (excl. Other inc.)

Other Income

Interest

Depreciation

Profit before tax

Tax

RPAT

APAT

EBIDTA (%)

Tax rate (%)

Sales-Chemicals

Sales-Fertilizers

Sales-Realty

EBIT-Chemicals

EBIT-Fertilizers

EBIT-Realty

QE Jun-10

350.5

258.2

92.4

11.1

16.7

73.5

21.3

52.2

26.3

29.0

231

129

-2

QE Mar-11

428.5

334.9

93.5

12.4

19.4

73.5

20.8

52.7

49.5

21.8

28.3

347

100

-1

QE Jun-11

473.9

361.0

112.9

12.7

19.1

87.9

24.0

63.9

23.8

27.3

333

147

-4

-42

106

-4

-38

-6

3180

N.A.

% y/y

-24

% q/q

-42

-2

Valuation and view

The new Ammonium Nitrate plant will be a driver of earnings. We maintain earnings for FY12 and will introduce FY13

earnings in due course. Our earnings factor in a 23% y/y growth in FY12, with expansion of ROE close to 100 bps. Key

drivers of the valuations will be visibility on utilization of the new Ammonium Nitrate plant and clarity on investment in the

proposed Australian plant. Both these drivers coupled with earnings growth should help improve valuations as sentiments

in the Indian equity markets turn positive. We reiterate our recommendation to Buy for a target of

Rs200.

Ravi Shenoy

(ravi.shenoy@MotilalOswal.com); Tel: +91 22 30896865

Deepak Fertilizers

Deepak Fertilizers- Financial & Valuation

INCOME STATEMENT

Y/E MARCH

2008A

2009A

(

CRORE)

2010A 2011A

2012E

RATIOS

Y/E MARCH

2008A

2009A 2010A

2011A 2012E

Net Sales

growth (%)

Other Income

Total Income

Mfg. & other expenses

Staff Costs

Admn, S&D Exp.

Other Expenses

Total Expenditure

EBITDA

% of Net Sales

1,127

1,174

814

928

247

1,457

1,502

1,067

1,245

256

40.7

156.1

69.1

-28

1,288 1,562

-12

1,358 1,598

857 1,037

107

1,009 1,224

348

238

172

374

258

184

1,973

2,008

1,315

134

1,538

470

319

222

Adjusted EPS

Growth (%)

Cash EPS

Book Value

DPS

Payout (Incl. Div. Tax) (%)

Valuation (x)

P/E (x)

Cash P/E (x)

Price/Book Value (x)

EV/EBITDA (x)

EV/Sales (x)

Div. Yld (%)

Return Ratios (%)

RoE (%)

RoCE (%)

Leverage (x)

Debt/Equity (x)

CASH FLOW STATEMENT

13.6

19.4

79.9

3.5

10.0 17.0

-27

16.7 24.3

90.4 103.4

4.0

4.5

20.5 25.2

28.6 35.6

120.9 139.6

5.0 5.5

Depreciation/Amortization

Finance Charges

17.1

PBT

177.9

Tax

57.8

PAT

120

growth (%)

17.5

17.9

0.5

11.5

15.0

0.8

9.3

6.5

1.5

5.5

1.5

2.8

17.3

17.7

0.8

7.7

5.6

1.3

5.1

1.2

3.1

6.3

4.5

1.1

3.8

0.9

3.5

18.2 19.3

16.6 19.2

0.7

0.5

BALANCE SHEET

Y/E MARCH

2008A

2009A 2010A

(Rs CRORE)

2011A 2012E

(Rs CRORE)

2008A

2009A 2010A

2011A 2012E

Y/E MARCH

Equity Share Capital

Preference Share Capital

Reserves

Shareholders' Funds

Debt

Net deferred tax

SOURCES OF FUNDS

Net Block

Capital WIP

Investments

Current Assets

Inventories

Sundry Debtors

Cash and Bank Balances

Loans and Advances

Other Current Assets

Net Current Assets

Misc expenses

631

719

349

1,134

617

248

438

226

181

722

810

608

836

924

731

PBT before EO items

Add :

Interest

(Inc)/Dec in WC

Others

Depreciation

178

-104

156

-55

-14

188

-235

-218

258

-35

-41

235

159

128

160

238

-128

228

-240

-230

123

-40

-46

135

160

207

258

-55

-76

242

319

-43

-86

341

978 1,143

1,066 1,231

775

675

100

CF from Operating activities 158

(Inc)/Dec in Fixed assets

Others

-217

1,487 1,721

787

244

635

104

278

160

271

364

809

414

639

116

202

207

113

235

403

1,922 2,006

1,017 1,296

271

114

828

157

250

269

152

307

521

114

969

198

316

303

152

372

597

-136 -100

44 -100

-44

-49

-59

CF from Investing activities -145

Inc/(Dec) in debt

Dividend paid

Less: Interest paid

Others

CF from financing activities

Inc/(Dec) in cash

Add: Beginning balance

Closing Balance

-31

-17

-4

-44 -207

207

269

303

Current Liabilities & Provisions 257

APPLICATION OF FUNDS 1,134

1,487 1,721

1,922 2,006

10 August 2011

Deepak Fertilizers

For more copies or other information, contact

Retail:

Vijay Kumar Goel

Phone: (91-22) 39825500 Fax: (91-22) 22885038. E-mail: reports@motilaloswal.com

Motilal Oswal Securities Ltd, 3rd Floor, Hoechst House, Nariman Point, Mumbai 400 021

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Deepak Fertilizers

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