'Indian specialty chemicals story strong', says Anand Rathi, suggests these top 8 stocks to buy, hold
1 min read 28 Sep 2022, 11:54 AM ISTThe brokerage has Buy ratings on specialty chemical stocks Aarti Industries, Atul and Sudarshan Chemicals
PremiumDomestic brokerage and research firm Anand Rathi analyzed the FY22 annual reports of six chemicals companies (SRF, Vinati Organics, Fine Organic, Navin Fluorine, Deepak Nitrite and Atul). The Covid-19 pandemic impact, widespread supply bottlenecks, non-availability of key raw materials, higher energy and raw material prices were key challenges in FY22, as per the brokerage house.
“The companies’ strong revenue growth came from higher realizations and volumes on the low base. Despite the topline growth, EBITDA margins were hurt by lower gross margins (higher raw material costs not fully absorbed), higher power &fuel costs (energy crisis) and higher freight &forwarding expenses (logistic challenges and container non-availability)," the note stated.
Ahead, the companies are positive on the long-term structural growth of the Indian chemicals sector on the back of the China+1 strategy, focus on reducing chemical imports, R&D capabilities, and its leading and strong position with favourable government policies, it added.
The brokerage house has Buy ratings on specialty chemical stocks Aarti Industries with a target price of ₹960, Atul (TP: ₹10,145), and Sudarshan Chemicals (TP: ₹585).
Meanwhile, it has Hold stances on Navin Fluorine (TP: ₹4,650), Vinati Organics (TP: ₹2,350), Galaxy Surfactants (TP: ₹3,500), and Neogen Chemicals (TP: ₹1,572), and Nocil (TP: ₹296).
With supply-chain disruptions and uncertainty in China, global manufacturers are seeking to diversify their sourcing. India provides strong alternatives with scale, technology, raw materials and supportive government policies, as per Anand Rathi.
“India’s chemicals sector is in a good position to profit from this change and capture a sizable share of the market. Indian chemicals manufacturers are poised to emerge as a credible alternative and, in some cases, primary suppliers to global firms. While all in the Indian chemicals sector would benefit from this shift, specialty chemicals manufacturers could gain the most due to higher entry barriers and potential for value-added niche products," the note added.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
