Stocks to buy: Navin Fluorine, Neogen, Galaxy Surfactants among top picks in chemical sector by HDFC Securities

The corporate earnings for the third quarter of FY24 witnessed mixed trends. The auto and energy sectors led Q3FY24 net profit beat, while select names from lending financials, home improvement, chemicals, infrastructure and consumer discretionary missed the estimates.

HDFC Securities said its preferred sectors are industrial and real estate, metal, power, insurance, cement & building materials, market infrastructure, pharma and gas. It remains underweight on consumer staples, NBFC, chemicals and small banks. 

In its model portfolio, the brokerage firm has added weights in steel, media, staffing and cash/InVIT while weights have been reduced in BFSI, industrial/ real estate and energy. 

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In the chemical sector, HDFC Securities has a ’Buy’ rating on Navin Fluorine, Galaxy Surfactants, Neogen Chemicals and Aether Industries.

Here are stocks to buy in the chemical sector.

SRF | Add | TP: ₹2,449

HDFC Securities has retained its ‘Add’ rating on SRF, with a target price of ₹2,449, on the back of deployment of capex for high-growth speciality chemicals business over the next 3-4 years to tap opportunities emerging from the agrochemical and pharmaceutical industries and a strong balance sheet.

Aarti Industries | Add | TP: ₹733

The brokerage tweaked its FY24 and FY25 EPS estimates for Aarti Industries by +3.5 and +4.3% to ₹8.8 and ₹17.3 to factor in performance in Q3FY24. It maintained an ‘Add’ recommendation on the stock with a target price of ₹733 per share. 

Aarti Industries’ constant focus on Capex and R&D will enable it to remain competitive and expand its customer base. The toluene segment in India is mainly untapped and catered to through imports; AIL will benefit in the long term by entering this segment, said the brokerage.

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Navin Fluorine International | Buy | TP: ₹4,014

The brokerage firm retained its ‘Buy’ call on Navin Fluorine International with a target price of ₹4,014 per share on the back of earnings visibility, given long-term contracts; tilt in sales mix towards high-margin high-value business; capacity expansion led growth; and strong R&D infrastructure. 

HDFC Securities cut its FY24 and FY25 EPS estimates by 11% and 10% to ₹47 and ₹80 owing to a slower-than-expected ramp-up in the Honeywell plant and weak performance of Q3FY24.

Aether Industries | Buy | TP: ₹1,124

It retained its ‘Buy’ rating on Aether Industries, with a target price of ₹1,124 owing to capacity expansion-led growth, advanced R&D capabilities, technocratic management, market leading position in most of its products, strong product pipeline, and marquee customer base.

Galaxy Surfactants | Buy | TP: ₹3,529

Our Buy recommendation on Galaxy Surfactants with a price target of ₹3,529 is premised on (1) the stickiness of business, as over 50% of the revenue mix comes from MNCs, and (2) the ability to pass on fluctuations in raw material costs to its customers, HDFC Securities said.

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NOCIL | Add | TP: ₹288

It has an ‘Add’ recommendation on NOCIL with a TP of ₹288 per share, premised on a ramp-up in capacity utilisation and expansion of margin with a focus on specialised rubber chemicals. 

It cut FY24 and FY25E EPS estimates by 3% and 1% to ₹7.4 and ₹11.2 to factor in the Q3FY24 performance.

Ami Organics | Add | TP: ₹1,201

HDFC Securities cut its FY24 and FY25 EPS estimates by 7% and 6% to ₹20 and ₹32, owing to the Q3 performance and fall in product prices. It retained an ‘Add’ rating on the stock with a target price of ₹1,201 per share. 

Expansion of its speciality chemicals portfolio, contribution from long-term contracts which shall start contributing to revenue from 4QFY24, and strong product pipeline in its advanced pharma intermediate business are likely to act as catalysts.

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Neogen Chemicals | Buy | TP: ₹2,127

HDFC Securities’ ‘Buy’ recommendation on Neogen Chemicals with a target price of ₹2,127 per share is premised on entry into the new-age electrolyte manufacturing business; increasing contribution of the high-margin CSM business to revenue; capacity-led growth momentum in legacy business; and improving return ratios and strong balance sheet, going forward. 

It cut our FY24/25 EPS estimates by 26/21% to ₹18/38.to factor in Q3FY24 performance and management guidance.

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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.