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Chemicals: Numbers boosted by higher raw material prices and inventory gains; Thematic focus to stay

ICICIdirect Research 28 Aug 2026 DISCLAIMER

Q1FY27 Chemical numbers were one of the strongest among last few quarters.  Besides inventory gains arising from higher raw material prices and a lower base, the numbers were boosted by strong numbers of Fluorination players.
Consolidated revenues of 9 covered companies grew 27% YoY to ₹ 13900 crore, EBITDA grew by 39% to ₹ 3150 crore, and PAT grew 57% to ₹ 1920 crore.
Fluorination players reported qualitatively strong earnings on the back of firm refrigerant gas prices, healthy volume growth, and sustained demand for high end Fluoropolymers where Chinese competition is limited.
Thematically, we remain positive on companies focused on Fluorination Chemistry, battery chemicals, and companies focusing on sunrise segments such as data centres, electronics & semiconductors, among others.
We expect refrigerant gas prices such as R-32 (up 45% YoY to ~₹ 950 / kg) ) and R-134a (up 40% YoY to ~₹ 920 / kg) to remain firm due to two factors- 1) strong user industry demand and 2) most of the developed countries and China are supposed to reduce production substantially due to global regulatory restrictions which is likely to benefit Indian players who have window till 2027 end. Beneficiaries- Gujarat Fluorochemicals, Navin Fluorine, SRF.
We remain neutral on companies focusing agrochemicals and other commodity chemicals as the threat from Chinese oversupplies, price volatility and availability of raw materials remain high. The only exception is Sumitomo Chemicals which is expected to get incremental global orders and segment expansion at the behest of the Japanese parent.
We also like companies following green chemistries (oleo chemicals) which are expanding into green chemistries for incremental applications in food additives, polymers, and fragrance chemicals.
Our top picks are Gujarat Fluorochemicals- TP ₹ 5800; Navin Fluorine- TP ₹ 9635; Neogen Chemicals- TP ₹ 2460; Privy Specialty Chemicals- TP ₹ 4490; Sumitomo Chemicals- TP ₹ 625

 

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