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The specialty chemical companies under brokerage Motilal Oswal's Universe have spent a cumulative 44 billion in capex during FY20-22 and are expected to spend another 54 billion during FY23-24, , setting the stage for the next leg of growth, said the brokerage in a note. 

The brokerage, while sharing its top stock picks in the space, said that it has Buy tags on specialty chemical stocks Galaxy Surfactants with a target price of 3,536, Vinati Organics (TP: 2,387) and NOCIL (TP: 306). 

“With the emergence of the specialty chemical companies to the forefront of the China+1 strategy, there has been no looking back for them. They seek to capitalize on the growth story of not only the domestic market but also cater to the increasing global demand for the chemicals that these companies are into," the note stated.

The China+1 story is not new to the specialty chemical industry and has been in place since 2016 when the Chinese government initiated a series of shutdowns on the chemical factories in their country due to environmental concerns.

This has led to increased confidence of global customers demanding more from the Indian manufacturers, which in turn has led to a never-seen-before capex cycle in the Indian Chemical industry in the past six years, Motilal Oswal highlighted.

Many of the specialty chemical companies are getting into new and cross chemistries to de-risk and diversify their product portfolios from the legacy businesses; many of these depend on crude derivatives as feedstock or do not deal in complex chemistries.

“Chemcon Speciality, Vidhi Specialty, Navin Fluorine, Vinati Organics, Chemplast Sanmar, and the likes are getting into new product categories while Laxmi Organic, Deepak Nitrile, Atul, Meghmani Finechem et al. are entering into new chemistries that would help them leverage their core competencies against the competition," the brokerage stated.

Anticipating strong results, another brokerage Edelweiss is also bullish on Gujarat Fluorochemicals with target price of 3,676, SRF (TP: 3,072), Fine Organics, Galaxy Surfactants (TP: 4,159), Deepak Nitrite whereas it has Hold stance on Fine Organics. Its top stock picks are GFL, Fine Organics (TP: 5,521), Galaxy Surfactants and Deepak Nitrite (TP: 3,127).

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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