Deepak Nitrite Ltd: At a Crossroad After a Decade-long Rally

🔍Technical Analysis

Deepak Nitrite has experienced an extraordinary rally over the past decade—from below ₹100 to a peak near ₹3,000 in October 2021. The ₹3,000–₹3,200 zone has repeatedly acted as resistance, while the ₹1,700–₹1,800 range has served as a strong support zone. Currently, the stock trades around ₹1,760, hovering near that support.

Lately, fundamentals have decelerated: after years of strong growth until ~2022, the company has faced negative year-on-year profits in recent periods. This makes the current technical zone even more critical: any push above ₹2,000 could reignite a rally, but entry should be confirmed with improving financials.

Targets:

Target 1: ₹2,300

Target 2: ₹2,600

Target 3: ₹3,000

If the ₹1,700–₹1,800 zone fails to hold, the bullish thesis would be invalidated—expect limited upside in that case.

💰FY25 Financial Highlights (vs FY24 & FY23)

• Total Income: ₹8,282 Cr (↑ ~7.8% vs ₹7,682 Cr; ↑ ~8% vs ₹7,972 Cr)
  
• Total Expenses: ₹7,682 Cr (essentially flat vs FY24; declined vs FY23)
  
• Profit Before Tax: ₹953 Cr (↓ vs ₹1,102 Cr in FY24; ↓ vs ₹1,146 Cr in FY23)
  
• Profit After Tax: ₹697 Cr (↓ from ₹811 Cr in FY24 and ₹852 Cr in FY23)
  
• EPS: ₹51.12 (down from ₹59.45 in FY24 and ₹62.47 in FY23)
  

📌 Despite revenue growth, margins and net profits have contracted, under pressure from rising costs and operating inefficiencies.

🧠Fundamental Highlights

The company has committed to a ₹8,500 Cr investment in PC resin/phenol capacity, aiming to vertically integrate and reduce dependency on external suppliers.

FY25 saw an 8% rise in revenue, reaching ₹8,366 Cr. However, net profit dropped ~14% to ₹697 Cr due to cost pressures.

Margins under stress: Gross margins compressed as input costs increased—impacting profitability despite revenue gains.

Valuation & Sentiment: JM Financial continues to rate Deepak Nitrite as a Buy, keeping the target at ₹2,305 amid expectations of turnaround.

Dividend & Financial Position: The company retains modest dividend payouts (~0.4% yield) with a payout ratio around 13%.

Balance Sheet: In FY25, a significant jump in long-term debt to ₹1,267 Cr raised leverage risks vs prior years.

✅Conclusion

Deepak Nitrite is perched at a pivotal level. While its long-term technical setup still holds promise, recent financial trends introduce caution. A break above ₹2,000 with improving fundamentals could trigger new upside, but a failure of the ₹1,700–₹1,800 support zone would cast doubt on future growth.