I don’t track deepak nitrite closely now. Used to own and track it earlier… Having tracked it earlier, I know that its difficult to apply DCF to such commodity/partially commodity stocks. Slight change in terminal value can play havoc with DCF valuations. Any accident can play havoc. Any change in prices of finished products/raw materials can alter the calculations.
As far as I know, DCF is suitable for businesses with predictable growth and cash flows. Its difficult even for promoters to predict business a few quarters down the line in such businesses, let alone analysts and investors.
To give you an example, (and most people will agree that pharma is an inherently more predictable business than chemicals) I remember people making projections for Alembic pharma based on their capex for US markets. Now the situation is that in the absence of USFDA approvals, their whole new facility has turned into a white elephant and all DCF calculations have gone for a toss.
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