Home / Markets / Stock Markets /  These two multibagger chemical stocks may turn large-caps in Amfi review
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According to Edelweiss Alternative Research, two chemical stocks - SRF Ltd and PI Industries - could move into the large cap category as classified by Association of Mutual Funds in India (Amfi) in its next semi-annual review. The listed stocks must be categorized into baskets with a well-defined classification of large cap, mid cap and small cap stocks to ensure uniformity in respect of the investment universe for equity mutual fund schemes.

Edelweiss list is an initial prediction to the official list to be released by Amfi in January.  The Amfi stock categorization list is referred by active equity fund managers. Amfi in consultation with Sebi and stock exchanges prepares the list of stocks with categorization based on the market capitalization.

The upwards recategorization helps stocks in terms of visibility but not necessarily immediately in term of flows. As the stocks move up from the lower categorization to higher (eg- smallcap to midcap and midcap to largecap), it leads to more visibility for stocks and thus the fund managers can look to further analyze the stocks.

PI Industries

Shares of agrochemical company PI Industries today surged 5.5% to 2888.65, giving it a market cap of 43,826 crore. The stock has been a multibagger in the chemical space, giving returns of 2,800% in last 10 years. 

Earlier this month, PI Industries announced the termination of agreement with active pharmaceutical ingredient or API maker Ind Swift Laboratories. In July this year, PI Industries Limited (PI) had executed a business transfer agreement (BTA) with Ind-Swift Laboratories Limited (ISLL) for acquisition of their API and intermediates business undertaking on a slump sale going concern basis.

PI Industries however said its long-term strategy to strengthen presence in custom synthesis exports through diversification into adjacencies including pharma remains intact.

In the second quarter, Pi Industries had reported a 17% jump in revenues to 1,354 crore while net profit rose to 230 crore.  “Gross margin maintained despite sharp increase in input costs mainly on account of favourable product mix," the company said. 

Motilal Oswal in a note said "despite the calling off of the Ind Swift Laboratory deal, PI remains confident of scaling up revenue from the pharma segment to 20% in the next four years. “The company has levers in place to sustain the near-term growth momentum. We value the stock at 35x EPS (in line with its three-year avg one-year forward P/E) to arrive at target price of 3,215." The brokerage maintains buy on the stock. 


Shares of SRF, another multibagger in the chemicals space, today ended nearly 2% higher at 2192.45, giving it a market cap of 64,946 crore. The stock has given 3,500% return in last 10 years. SRF Limited, a chemical based multi-business entity engaged in the manufacturing of industrial and specialty intermediates, reported a 35% growth in consolidated revenue to 2,843 crore in Q2FY22. The company’s profit after tax (PAT) increased 21% from 316 crore to 383 crore in Q2FY22.

HDFC Securities has an add rating on “SRF with a target price of 2,380 on the back of (1) continued healthy performance from speciality chemicals business and packging films business; (2) recovery in the technical textiles segment; (3) strong balance sheet; and (4) deployment of capex towards high-growth speciality chemicals business over the next 3-4 years to tap the opportunities emerging from the agrochemical and pharmaceutical industry. EBITDA/APAT were 3/3% below our estimates, owing to higher-than-expected raw material costs, higher-than-expected opex and a higher-than-expected tax outgo."


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