New Facilities In Gopalpur And Dahej Will Support Long-term Self-sufficiency

Key Takeaways

• Strong specialization in high-margin, value-added products is expected to boost margins and reduce volatility while leveraging export opportunities for stable growth.
  
• Capacity expansion, backward integration, and international partnerships enhance self-sufficiency, operational strength, and open new avenues for innovation and market reach.
  
• Exposure to regulatory, supply chain, input cost, and competitive pressures challenges profitability, margins, and predictable earnings growth amid substantial capital expenditure and operational risks.

Catalysts

Produces and sells fertilizers and industrial chemicals in India.

• Increased crop nutrition product adoption and recent strong growth in specialty fertilizers position Deepak Fertilisers to capitalize on rising global food demand, which should drive higher volumes and support revenue and margin growth over the long-term.
  
• Commissioning of large-scale facilities at Gopalpur (TAN) and Dahej (nitric acid) by end-FY26, along with ongoing backward integration, will increase self-sufficiency, lower input costs, and enable margin expansion from FY27 onwards.
  
• Strategic focus on specialty and value-added products-now about 80% of topline-with demonstrated price premium of 15-40% over commodities, is expected to further boost EBITDA margins and reduce earnings volatility.
  
• Expansion of export quota for TAN, combined with domestically favorable supply/demand dynamics and locational advantage on both Indian coasts, provides additional growth levers and hedges against domestic oversupply, supporting long-term revenue stability.
  
• Enhanced integration with the profitable Australian subsidiary strengthens Deepak's technical and operational capabilities in value-added mining services, which can be leveraged for future product innovations and international market expansion, driving incremental earnings.

Deepak Fertilisers And Petrochemicals Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Deepak Fertilisers And Petrochemicals's revenue will grow by 8.8% annually over the next 3 years.
• Analysts assume that profit margins will increase from 9.2% today to 10.6% in 3 years time.
• Analysts expect earnings to reach ₹14.5 billion (and earnings per share of ₹104.94) by about August 2028, up from ₹9.8 billion today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 19.7x on those 2028 earnings, up from 19.3x today. This future PE is lower than the current PE for the IN Chemicals industry at 27.6x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 14.07%, as per the Simply Wall St company report.

Deepak Fertilisers And Petrochemicals Future Earnings Per Share Growth

Risks

• Rising global focus on sustainable agriculture and stricter environmental regulations could reduce long-term demand for chemical-based fertilizers, potentially decreasing Deepak Fertilisers' volume growth and pressuring future revenues.
  
• High dependency on imported ammonia, which accounts for 75-80% of variable costs, exposes the company to global commodity price volatility and foreign exchange fluctuations, which could negatively impact gross margins and net earnings.
  
• Potential overcapacity risk from large-scale government-backed entrants (such as the Coal India TAN project) and additional domestic/international supply could lead to competitive pricing pressures, lower asset utilization, and shrinking profit margins.
  
• Specialty fertilizer business relies partly on imported inputs, such as those from China, and could be negatively impacted by trade disruptions, export curbs, or higher input costs, which would erode margins and challenge earnings predictability.
  
• Ongoing and future large-scale capital expenditures (e.g., Gopalpur and Dahej projects) entail execution risks; delays, cost overruns, or slower-than-expected ramp-up in capacity utilization could weigh on free cash flows and drag on short
• to medium-term earnings growth.

Valuation

• The analysts have a consensus price target of ₹1531.333 for Deepak Fertilisers And Petrochemicals based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₹1725.0, and the most bearish reporting a price target of just ₹1337.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₹137.1 billion, earnings will come to ₹14.5 billion, and it would be trading on a PE ratio of 19.7x, assuming you use a discount rate of 14.1%.
  
• Given the current share price of ₹1502.5, the analyst price target of ₹1531.33 is 1.9% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.