Deep Industries Limited

Deep Industries Limited (DIL) based in Gujarat is a diversified oil and gas company with business interests in air and gas compression, work over and drilling, marginal field natural gas projects, coal bed methane projects, and oil and gas exploration projects. DIL is gas compression services provider. DIL is providing value added engineering services to various entrepreneurs of public and private undertakings. Deep Energy LLC, USA, Deep Natural Resources Limited and Prabha Energy Private Limited are the subsidiaries of the Company.

Four years top line and bottom line CARG stood at 61.93 and 29.36 per cent respectively. During FY 2009-10, the total revenues stood at Rs.1182 crores and PAT was Rs.280.44 crores. During Q2FY11, the company generated revenues of Rs.311.25 crores and PAT of Rs.81.35 crores.[ previous fiscals Q2FY10 corresponding figures were Rs.272.39 crores and Rs.87.34 crores. ]

The company has an Equity base of Rs.21.25 crores. Its EBITDA Margins are in the range of 55 per cent and its Net Profit margins are pretty good and hover around 22 to 25 per cent. The company enjoys a Return on Capital Employed of around 17 per cent and Return on Equity of around 16 per cent. Promotors stake in the company stands at .50.05 percent, FII’s own 2.34 and DII’s s own 10.63 per cent.

Deep Industries recently received a hiring services contract worth 115 milllion rupees for a period of five years at a property run by Oil & Natural Gas Ltd. DIL has been awarded two coal bed Methane (CBM) blocks by GOI in CBM III rounds.

CMP of the company’s share is Rs. 77.25 and as such is available close to its 52 week low of Rs.75.05. The 52 week high was Rs.122. Since the markets are very turbulent it is possible for the share price of Deep to slide below its 52 week low in which case the shares may become available at PE of around 10, current PE being around 13.

Deep Industries having a Market Capitalization of Rs. 164 crores, is a safe bet in the Oil and Gas space considering good profit margins and a Debt Equity ratio of less than one. Obtaining 50-100 per cent returns from this scrip in about 1 to 2 years time cannot be ruled out.

Kishor S. Khot, [Kishor@hbjcapital.com], Equity Strategist, HBJ Capital Services Pvt Ltd