Deepak Nitrite Faces Headwinds as Emkay Cuts Target on Weak Margins

Deepak Nitrite came under pressure after reporting a 44% YoY drop in Q1FY26 EBITDA to ₹1.7 billion, in line with Emkay Global’s estimates but below market consensus. In response, Emkay cut its FY26–28 EBITDA forecasts by up to 28%, slashed the target price to ₹1,800 (down 10%), and retained a ‘Reduce’ rating. The Advanced Intermediates (AI) segment saw revenue fall 15% YoY to ₹6.1 billion due to weak agrochemical demand, with EBIT margins contracting to 5.9% from 9.3% a year ago. The phenolics division also declined 12% YoY to ₹12.9 billion, though margins improved sequentially to 7.8% on cost optimization. Emkay cited ongoing margin pressure from Chinese imports and muted demand as key risks. Capex for FY26 has been trimmed to ₹8–10 billion (from ₹12–15 billion), with a long-term ₹100 billion plan for a phenol-BPA-polycarbonate plant, expected to deliver 16–18% IRR. Despite new capacity coming online in H2FY26, including trial runs at its nitric acid plant, limited volume growth and pricing challenges keep the outlook cautious. Emkay remains wary, emphasizing that recovery hinges on demand revival and import control.