This Smallcap Multibagger stock gave 1200% returns – turned 1 Lakh to 13 Lakhs in 5 years
If you are wondering which is the multi-bagger small cap stock that gave the highest returns in NIFTY Small Cap index in the last 5 years, it is Deepak Nitrite. Deepak Nitrite gave whopping 1223% returns in last 5 years. Means if would have invested Rs 1 Lakh 5 years back, your investment would have now been Rs 13.2 Lakhs. What is making such stock to create so much value to the investors. Would Deepak Nitrite continue to be a multi-bagger in coming years?
About Deepak Nitrite Limited
Deepak Nitrite is a chemical manufacturing company.
It has 70% market share in Sodium Nitrite, Sodium Nitrate & Nitro Toluenes in India.
It is among Top 3 global producers of Global producers of Xylidines, Cumidines and Oximes.
It has marquee customers in 30+ countries.
Deepak Nitrite Limited – Financial Performance during 2016-2020
Top line – Company consolidated revenues grew from 1,372 Crores in FY2016 to Rs 4,229 Crores in FY2020 (CAGR 33%). If we consider its standalone numbers, revenues grew at CAGR 14% in the last 5 years.
EBITDA – Company consolidated EBITDA grew at CAGR 64%. If we consider its standalone numbers, EBITDA grew at CAGR 54% in the last 5 years.
Profit – Company consolidated net profit grew from 62 Crores in FY2016 to Rs 611 Crores in FY2020 (CAGR 77%). If we consider its standalone numbers, margins grew at CAGR 70% in the last 5 years.
Deepak Nitrite Limited – Financial Performance Qtr ending Sep-2020
Company consolidated revenues declined from 1,003 Crores for Qtr ending Sep-2019 to Rs 987 Crores for Qtr ending Sep2020. However, sequentially it grew by 45% compared to previous Qtr.
Company consolidated net profits grew from 150 Crores for Qtr ending Sep-2019 to Rs 170 Crores for Qtr ending Sep-2020 (13% YoY growth). Sequentially it grew by 73% compared to previous Qtr.
Deepak Nitrite clocked close to 45% revenue growth (sequentially) for the Qtr ended Sep-2020, which is basically driven by phenolics and specialty chemicals businesses. If you observe, sales in the phenolics segment grew by 65% compared to Q2 to Rs 546 Crore, making its contribution 50%+ of the company’s revenue. On other side, sales of the business from fine and specialty chemicals increased by 50% (sequentially) to Rs 210 Crores.
Financial Ratios of Deepak Nitrate
Debt to Equity Ratio – 0.91 in FY2016 Vs 0.65 in FY2020
Return on Networth – 13.2% in FY2016 Vs 38.8% in FY20
Current Ratio – 0.97 in FY2016 Vs 1.54 in FY20
The stock currently trades at P/E of 19x
Why to invest in Deepak Nitrite share?
The company has good and strong fundamentals
Strong growth in margins Qtr on Qtr
Strong annualized EPS growth
Improved ROE in the last couple of years
Company has been reducing its debt in the last 3 years
FII / FPI’s are increasing their stake
Improved net cash flow
A company that has zero promoters pledge
Strong momentum in the share prices in the last 1 month to 5 years period
Low Lights of investing in Deepak Nitrite Limited
Company standalone revenue numbers for Qtr ending Sep-20 are down by 22%.
The company has been investing in long term projects where there is an increase in costs.
Domestic institutional investors (DIIs) and mutual funds have reduced the investments in this company in the last Qtr.
How much share price increased in the last 1 to 5 years?
The share price has moved from Rs 63.8 to Rs 844 in the last 5 years giving 1,223% returns. If one would have invested Rs 1 Lakh in Dec-2016, the amount would have grown to Rs 13.2 Lakhs.
The share price has moved from Rs 340 to Rs 844 in the last 1 year giving 148% returns. If one would have invested Rs 1 Lakhs in Dec-2019, the amount would have grown to Rs 2.48 Lakhs.
The share price has moved from Rs 751 to Rs 844 in the last 1 month giving 11% returns.
Technical charts of this stock still show VERY BULLISH.
Here is the price chart in the last 5 years (source Moneycontrol)
Which mutual funds have invested in a Deepak Nitrate Stock?
Here are the top 5 mutual fund schemes holding this company shares by end of Sep-20.
L&T Emerging Business Fund – 2.8 Mn shares (2.58% of their portfolio)
L&T India value fund – 1.7 Mn shares (2.5% of their portfolio)
SBI Magnum Multicap fund – 2 Mn shares (1.8% of their portfolio)
ABSL Smallcap fund – 0.9 Mn shares (3.73% of their portfolio)
ABSL Purevalue fund – 0.68 Mn shares (1.74% of their portfolio)
Should you invest in Deepak Nitrite Shares?
Deepak Nitrite is a multi bagger stock that gave 1,200%+ returns in the last 5 years. Its revenues grew at 33% CAGR in the last 5 years. It is generating consistent profits. Many countries believe that dependency on China should be reduced for such chemical manufacturing products. This can provide opportunities for companies like Deepak Nitrite. However, its Q2 standalone revenues declined by 22%. The covid pandemic impact would continue for another 1-2 quarters. FIIs are increasing their shareholding in this company in recent times, which is another major concern as sush stocks can fall faster when FIIs pull their money. However, in short to medium term, this stock looks attractive. One can buy such multi bagger stocks at dips / market corrections.
Disclaimer: I am not holding any shares in this company as of the date of writing this article. But I may purchase them anytime.
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