1000% in 5 years! Small-cap stock below Rs 300: Buy and gain up to 40% in 1 year

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Updated: May 04, 2018 1:12 PM

Here is a small-cap chemical stock below Rs 300 that has risen over 1000% in the last five years. According to HDFC Securities, the company is favourably positioned to capture opportunities emerging across the chemicals and speciality chemicals landscape.

Photo for representational purposes only. (Image: Reuters)

There are a bunch of multi-bagger stocks which have outperformed the headline indices Sensex and Nifty growing by 10 times or even higher in the last 5 to 10 years. We take a look at one such mid-cap scrip which has returned manifold in the span of last five years beating the industry peers. Shares of Gujarat-based Deepak Nitrite Ltd have returned more than 10 times in the time frame of fewer than five years. The stock of Deepak Nitrite Ltd has jumped 1025% to Rs 258.65 from a share price level of Rs 23 (share price is adjusted with the corporate actions) as on 6 September 2013. Deepak Nitrite Ltd issued bonus equity shares in a ratio of 1:1 and had a stock split in a ratio of 1:5 in June 2014.

The research and brokerage firm HDFC Securities has given a buy rating to the stock of Deepak Nitrite with a target price of Rs 348 which implies a potential upside of 35%. Deepak Nitrite, with a diversified product portfolio and huge distribution network, is favourably positioned to capture opportunities emerging across the chemicals and speciality chemicals landscape. Commissioning of phenol and acetone at Dahej, strong potential of sine and speciality chemical segment, new product launches will drive a sharp rise in earning of Deepak Nitrite, HDFC Securities said in a report.

We expect the company to post CAGR of ~36% in sales and ~34% in net profit over FY17-20E. While EBITDA margin is estimated to rise ~500 bps over the same time frame. Our estimates have a risk of delay in the project commissioning on time. “Currently, the stock is trading at 15.7x of FY20 which we think is quite an attractive level given the future prospects. We initiate Deepak Nitrite a buy at CMP of Rs 273 and add on decline of Rs 255 for the successive targets of Rs 302 and Rs 348 in the time frame of 1 year,” HDFC Securities said further.

Disclaimer: Views and recommendations given in this section are the brokerage firms’ own and do not represent those of www.financialexpress.com. Please consult your financial adviser before taking any position in the stock mentioned.

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