Deepak Nitrite Limited: A Chemical Sector Gem
Deepak Nitrite Limited has been a multibagger, delivering a staggering 721% return over the past five years. However, the stock has experienced significant volatility, with a notable rally in FY21 and FY22, followed by a decline in FY23 and FY24. Understanding the reasons behind these fluctuations is crucial for predicting future performance.
Key Insights:
Profitability Trends: The company’s profit after tax (PAT) grew by 27% in FY21 and 37% in FY22, driving the stock’s rally. However, FY23 and FY24 saw a decline of 20% and 5%, respectively, due to external factors like the Russia-Ukraine war and Chinese product dumping, which disrupted supply chains and increased input costs.
Future Outlook: The management anticipates a recovery in FY25 and FY26, as the demand-supply balance improves and advanced intermediates (AI) products see increased demand. With 65% of revenues from phenolics and 35% from AI, the company is well-positioned for a rebound.
Investor Activity: Promoters increased their stake from 45% to 49% in March 2023, and domestic institutional investors (DIIs) have also been accumulating shares, indicating confidence in the stock’s future.
Delhivery Limited: The Logistics Powerhouse
Delhivery Limited, a leading logistics company, has shown a pattern similar to Zomato’s pre-profitability phase. The stock has been under pressure since its IPO in May 2022 but holds significant potential for growth.
Key Insights:
Profitability Milestone: Delhivery’s EBITDA margins have turned positive, and the company is on track to achieve PAT profitability in FY25. This transition is crucial, as seen with Zomato, where stock prices surged post-profitability.
Revenue Streams: The company derives 62% of its revenue from express parcels, 19% from part truckload (PTL), and 10% from supply chain services (SCS). The express parcel segment is already EBITDA positive, and PTL losses have significantly reduced.
Cash Reserves: With a net positive cash flow of ₹5,444 crores, Delhivery has ample working capital to support its operations and growth initiatives.
APL Apollo Tubes Limited: The Structural Steel Leader
APL Apollo Tubes Limited, India’s top structural steel tube manufacturer, has delivered 922% returns over the past five years. Despite moderate returns of 28% in the last year, the company’s future looks promising.
Key Insights:
Market Leadership: APL Apollo holds a 55% market share in structural steel tubes, used extensively in housing, commercial buildings, and infrastructure projects.
Growth Drivers: The company expects a 20-25% growth in FY25, driven by increased demand from the housing sector post-elections. Additionally, significant capex investments in the Raipur and Dubai plants will boost production and revenue.
Innovative Products: New product lines, including the world’s first color-coated structural steel tubes, position APL Apollo as a leader in innovation.
Investor Confidence: Foreign institutional investors (FIIs) and DIIs have increased their stakes, reflecting strong institutional confidence.
Conclusion
Investing in stocks requires thorough analysis and understanding of market dynamics. Deepak Nitrite, Delhivery, and APL Apollo Tubes each present unique opportunities driven by their respective industry positions, growth strategies, and market conditions. While Deepak Nitrite is poised for a rebound as external pressures ease, Delhivery’s path to profitability mirrors successful precedents like Zomato. APL Apollo’s market leadership and innovative products make it a compelling choice for long-term growth.
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