Target: ₹300
CMP: ₹210.25
Dee Development Engineers’ Q3-FY25 revenue decline was a shocker, impacted by a delay in the revenue booking of India’s first Propane Dehydrogenation (PDH) plant project. Additionally, another international order, valued over ₹51 crore, faced a delay due to late revisions in material specifications by the customer, resulting in execution being pushed to Q4-FY25 instead of Q3-FY25. OPM fell to 3.5 per cent in Q3-FY25 from 14.5 per cent in Q3-FY24.
Order book stood at ₹1,394 crore, higher by 17 per cent sequentially.
The management has guided for a topline of ₹800-plus crore (Q4 revenue of ₹260-270 crore), with margins sustaining at 15-16 per cent implying a strong margin of over 20 per cent for Q4FY2025.
Dee Development is on a strong earnings growth trajectory, led by its capacity expansion plans, leading industry position, OPM expansion levers and process piping industry growth tailwinds.
We maintain a positive view with a revised base-case target price of ₹300 over the next 12- 15 months. However, given the strong earnings growth trajectory and potential improvement in market sentiment for SMID stocks over the next one year, our bull-case TP remains intact at ₹450 over the same period.
Key Risks: Downturn in end-user industries such as oil and gas and power segments would impact business prospects; and International exposure, competitive factors, and raw-material volatility are other key risks.