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Healthy performance form specialty chemicals, CRAMs expected to sustain - Chemicals Preview

ICICIdirect Research 14 Apr 2023 DISCLAIMER

What's Buzzing? 

The I-direct chemical universe is likely to witness a mixed quarter with agrochem, pharma and some specific specialty players to maintain their growth tempo while packaging, pigments, dyes and polymer players to remain muted. We expect growth of ~11.5% YoY on the revenue front in Q4FY23E. 


Strong growth in specialty chemicals and CRAMs is likely to continue its momentum in Q4FY23E on the back of strong demand in end-user industries and strong order book for key molecule. On the other hand, packaging films and pigments segments along with agrochemicals witnessing the seasonality trend in domestic market are likely to witness muted demand from end user industries. 

Our Perspective: 

The chemicals universe is expected to post YoY growth of ~11% to ~Rs 12,880 crore. Softening of crude oil prices during the quarter besides lower logistical and freight costs is expected to aid EBITDA margin growth. The expected higher growth vis-à-vis revenues will also be driven by higher growth from segments such as fluorine and CRAMs, which normally fetch higher margins. Another margin contributor could be better operating leverage as significant capex (especially by fluorine players) undertaken a few quarters back is now coming to the fore. Seasonality trend in domestic market and subdued demand from textile segment may restrict the growth of agrochemicals and pigments player in India. We expect our coverage universe EBITDA margins to grow ~350 bps to 22%, leading to EBITDA growth of 12.7% YoY. On the company’s front, Navin Fluorine, PI Industries and Tata Chemicals remain our top picks and are likely to see YoY revenue growth of 48.1%, 21.7%, 22.4%, respectively.

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