Wait and watch defensive stock
Deepak Nitrite already has a price-earnings ratio of 32 times over the earning of 2022-23, its stock may not be very lucrative unless something drastic comes to shareholders. The earning ratio is above the Sensex average. The indices are already ruling high. The chances of anything drastic seem weak in the long run. Its equity base is low at Rs 27.5 crore. With a book value of Rs 300 on a Rs 2 share, a bonus is not a remote chance.
The financial result last year showed some pressure on its net margin. Naturally, return on equity also had a corresponding beating. The efficiency of capital deployment also decreased.
A diversified product portfolio and leadership are some of the products that ensure it is a safe business. Though its PE ratio is too high, the downside in price is not very steep unless indices fall steeply for any tax policy or political reason. Deepak Nitrite is more of a defensive stock.
At the current price of Rs 1978, it is not very attractive for investment. If it is there already in one’s portfolio, there is no harm in retaining it, if there is a holding capacity until it breaks the price of Rs 2355 recorded in November 2022. Better to wait until the Q1 2023-24 result is out.