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Specialty specific players continue to do well - Chemicals Q3FY23 Review

ICICIdirect Research 24 Feb 2023 DISCLAIMER

What's Buzzing? 

The I-Direct Chemical universe companies in Q3FY23 reported a mixed set of numbers amid contrasting business dynamics. On the bright side, fluorine, bromine, agrochem CSM, and other specialty players performed well while on the other hand pigments, polymers and domestic agrochemical players registered subdued performance. In the commodity space, Tata Chemicals registered decent numbers amid tighter global soda ash demand economics. 


Among fluorochemical players, growth in SRF was driven by strong traction in the domestic market and higher prices for certain key refrigerants in important international markets while for Navin Fluorine the main growth driver was CDMO segment. Neogen Chemicals’ sales growth was on the back of strong growth in bromine compounds and lithium based chemical products while Vinati and Tata Chemical sales were buoyed by IBB, ATBS and soda ash, respectively. Agrochem and other segment CSM drove PI Industries’ growth. Domestic agrochemicals numbers were muted due to erratic and unseasonal rains. Thus, players like Rallis and Sumitomo reported flat YoY growth while Astec reported de-growth. Overall, the universe reported a decent set of numbers with revenues growing 15% YoY to Rs 12,418 crore while EBITDA and PAT jumped 22% YoY & 14% YoY to Rs 2,747.6 crore and Rs 1,573.4 crore, respectively. 

Our Perspective 

Despite mixed fortunes of covered companies, overall print for the universe was decent mainly on the back of new product introduction and ramp up of recently commissioned facilities. We expect specialty players to continue to maintain growth momentum on the back of product specific capex, firm customer orders and growing opportunities from the void created by Chinese and European constraints. Buoyed by demand, most companies have already chalked out capex plans stretching beyond FY26. We observe that companies are extensively working for the CRAMs model, which has better visibility. We expect a recovery in domestic agrochem players from Q4 onwards. Our top picks in the sector are PI Industries, SRF, Neogen, Vinati and Sumitomo Chemicals.

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