Deep Industries (DIL)

Stock Opportunities
1

Hello,

I have come across this stock, and started researching on it with what ever i am learning through this platform, i have not find the thread on this stock so starting it, request all the senior to help me to explore this stock.

About: Deep Industries Limited (DIL) is a well diversified oil & gas Company serving the industry since 1991 with business interestin Air and Gas Compression, Work Over, Drilling and Oil & Gas Exploration and Production. DIL is the first Company in Indiato provide high pressure Air and Gas compressors on charter hire basis. DIL is the largest Natural Gas Compression servicesprovider in India. DIL is providing work-over and drilling services to exploration and production (E&P) Companies through itsfleet of rigs. DIL has also expanded in Exploration and Production Business of Oil, Gas and Coal Bed Methane.

Financials:

Market Cap : 225 cr

CMP: 78

PE: 10.28

D/E : 0.61

Promoter holding: 68.13% , no pledge of shares

Divident paying stock (last divivend is 10% on 04-09-2014)

Sales has gron from 55.34 crs in 2010 to 90.77 cr in 2014. In FY 15 H1 sales is 52.42 cr

Operating Margin is above 50%

Net Profit has gone from 14.36 cr in 2010 to 20 cr in 2014. In FY 15 H1 profit is 11.16 cr

STRATEGY :

1). Planning to raise its drilling and compression capacity

2.looking to get into Offshore Drilling business

3.looking to buy producing oil and gas acreages worldwide

Gas Business :

Co is the largest Contract Compression service provider in India. Currently the Company is executing

various natural gas compression projects with various Public and Private sector companies in India. The Company executes

contract compression on turnkey basis, which includes supply of Equipment, Installation, Commissioning and Operation &

Maintenance of gas engine driven compressor packages.

Drilling Business :

Company has 6 workover Rigs of various capacities and 1 Drilling Rigs operating with various renowned E&P Companies inOil & Gas sector across India. Company has done various Drilling & work over operations. DIL has been successfully inserving long term contracts since last 10 years. Company has bid for various drilling contracts within India as well as acrossthe globe.

OIL AND GAS EXPLORATION AND PRODUCTION BUSINESS :

Deep Industries Limited (DIL) and its subsidiary companies are holding large acreage of good onshore exploration & productionassets in both conventional and unconventional category. The total acreage operated by the Company is over 11800 sq kmwith prognosticated hydrocarbon resources of over 1350 Million Barrels of Oil Equivalent (MMBOe). Out of 10 blocks, 3blocks are in development phase, one in appraisal phase and rest in exploration phase.

IIFL Interview with Paras S Savla trasncript :

http://www.indiainfoline.com/article/research-leader-speak/interview-of-mr.-paras-savla-promoter-director-deep-industries-limited-14348565_1.html

I don’t know much about the industry, so request senior to comment on it and correct me.

This is the first time i am seeing any company in detail.

I think company is availabe at low valuation and has good potential in the coming time.

Disc: No invested

2 Likes
2

80% market share. looks interesting.

3

The iifl interview seems to be from pre-ipo times…? Just looked up the shareholding pattern - a Jignesh P Shah holds > 1% of the shares. Would he be the FTIL promoter?

4

@ HG : Yes the interview is from pre ipo times, posted to give the management view on the company and industry, may be biased due to the pre ipo talks.

Yes, Jigesh P Shah seems to be same person - FTIL promoter, he has taken a stake in Q2 of this FY as per the monecontrol.But will it make difference if he is a small investor ?

http://www.moneycontrol.com/bse/shareholding/quarterly_shifts.php?type=1&res=search&id=8271

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No - I don’t think its bad. He is supposed to be a really smart guy and maybe he noticed something about this company. Who knows :slight_smile:

(not invested)

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I prefer to study the cash-flow rather than the P&L of any company, because it tells more. Unfortunately, the company’s website does not provide the cash flow, both in the audited accounts of 2013-14 and the quarterly results of Sep 14. In the absence of which, 2 points merit more scrutiny:

1). Net Sales for the qtr ended Sep14 was Rs. 25 cr. The Debtors as on Sep 14 was rs. 24 cr. Going by FIFO logic of debt collection, the entire quarter’s revenue seems outstanding.

2). Depreciation for qtr ended Jun14 shot up to Rs. 4.17 cr and Dep for the qtr ended Sep14 dropped to Rs. 2.7 cr. Fixed Assets are constant at Rs. 290 cr in Mar14, and Sep14 (bal Sheet for Jun14 qtr is not available on company’s website)

1 Like
7

The company has posted a very good quarter in December’15 operating profit(31.28 Cr) has almost doubled from the same quarter last year .Margins have also improved.The company has recently received an order worth of Rs 247cr from ONGC.(http://www.business-standard.com/article/markets/deep-industries-surges-on-bagging-order-from-ongc-116031700392_1.html) at current PE level 12.5 and Market cap 401 cr the company deserves a closer look.

2 Likes
8

Is anybody invested into this, I am analysing this, to me it looks like a v promising story esp on gas dehydration , it has a kind of monopoly .

@rohitbalakrish_ I find your name in Q3 concall, would like to hear your opinion on this, thanks

Santosh

1 Like
9

Promoters are increasing stake to 75% and are confident of revenue growth but the increasing debt is a concern. Also, cash flow is missing or am I reading it wrong?

Only thing going for them is the ONGC contract. Long term contract with ~24% margin should lift up some spirits.

1 Like
10

To me this looks like a very promising and obvious story, we need to dig it further, the margins are also superb, I guess this is still not well covered co.
The new gas dehydration business is the game changer.

To me it looks like high growth at reasonable valuations

Disc : invested, views r biased !

11

Came across this company in DSIJ. It was recommended as one of the 5 growth stocks.

Going by the chart of TTM P/E displayed there, it has reduced recently.

Also there seems to be no valuation to the company’s exploration assets. Probably because the monetization is some time ahead in future.

In the corporate presentation available on the website of the company, the company has contracts for dehydrating 3.1 MMSCMD. In the same presentation they say that the immediate potential for gas dehydration is 10 MMSCMD or slightly higher than 3 times.

In an interview on TV, Paras Savla said that FY17 revenue growth and Pat growth could be on similar lines as FY16.

Positive Points:

  1. Order book of 875 crores gives revenue visibility over current FY16 revenues*5 years.
  2. Inexpensive valuations at 12 times Earnings
  3. Mgt has indicated FY 17 to be good
  4. Good client list in the Oil and Gas space

Negative points:

  1. Client concentration risk: 80% of order book with ONGC
  2. Safety and Health Hazard risk: If any of the client activity that is outsourced is mismanaged resulting in fire, explosion, safety issues, health hazard etc, even existing contracts may be terminated and future contracts hard to come by.
  3. Foreigner partners decide to start their own Indian operations thus more competition and loss of access to partners (may include technological factors as well)
  4. not debt free

I will monitor this company. Need to look at competitors as well as potential order wins. Client diversification may lead to rerating and higher P/E multiple.

2 Likes
12

Deep Industries Ltd has informed BSE that the Company has received Notification of Award for Hiring of Gas Dehydration Units for a period of 3 (Three) years at ONGC Tripura Asset viz. ADB and Konaban GCS. The total estimated value of the said Award is US$ 4.16 Million equivalent to INR 28 Cr.

1 Like
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Deep ind is in the very nascent stages of its growth. As the gas sector in India will grow deep will be one of the biggest beneficiaries. Reliance is also on the verge of settling their dispute with the govt. Their production will jump in no time as they have studied their field for years and know how to ramp up the production with existing infrastructure.

Also deep ind has several unexplored CBM blocks which they will start exploring in the future. I am of the opinion that Deep Ind will one day quote at a valuation of not less than 2000 crores.

1 Like
14

I agree.
Gas dehydration is the game changer in which they have a monopoly till some else enters into this space.
The q numbers should speak for itself in coming q ?
Promoter increasing stake is another +ve

Disc : holding, view r biased

15

I had it and stayed with it for few months. But it is very slow mover. So, I quit recently. I believe result should be good but prev qtr results was also good but gain was almost none.
I think oil sector stocks will remain subdued.

16

Deep ind moves in spurts and bouts. It stays subdued for prolonged periods and then jumps in a jiffy. I foresee one such big upmove shortly which will take it above 200 and keep it there for a long time.

Disc : I started buying deep from 60 and bought it all the way upto 20. At present my cost is negative.so my views are biased.

17

When did the stock go to Rs 20 ???

18

In August 2013 the stock had reached 21.90

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Deep hit 191 today and this is just the beginning of a monstrous rally.

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http://www.deepindustries.com/Uploads/Investor%20Presentation%20July%202016_201607120548496462.pdf

Pls find the nee investor presentation co shared with exchanges today

Refer slides 19, 20 for details on gas dehydration business, they have 90 % mkt share as shared earlier and opportunity size is huge

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