Domestic brokerage and research firm Nuvama Research has maintained its positive outlook for the speciality chemicals sector amid potential near term moderation of their bottom-line growth and demand pressure in few end-user industries. Most players in the sector have accelerated their capex plans, and growth shall be driven by capacity addition and moving up the value chain, it said in a note.
“Meanwhile, structural growth drivers such as import replacement, China plus One and global players’ continued focus on outsourcing remain intact. Soda ash players are likely to continue to benefit from solid realisation and favourable demand-supply scenario, whereas caustic soda prices may be under pressure amid commissioning of new capacity. We like fluorine-based players given a strong demand environment and supply constraints,” the note stated.
The brokerage reckons the structural growth opportunity in speciality chemicals is exciting. To be sure, it does anticipate growth moderation in the near term as output prices have started softening in tandem with falling raw material prices and believes fluorine players such as SRF and Gujarat Fluoro would sustain growth momentum.
Sharing its top recommendations, it has Buy rating on specialty chemical stocks Aarti Industries (with a target price of ₹805), Anupam Rasayan (TP: ₹1,069, Deepak Nitrite (TP: ₹2,826), Gujarat Fluoro (TP ₹5,031) PCBL (TP: ₹155), SRF (TP of ₹3,128).
“Almost all chemicals players including SRF, Gujarat Fluoro, Anupam Rasayan, DCM Shriram, Aether Industries, Deepak Nitrate, Aarti Industries and Jubilant Ingrevia have accelerated their capex plans and exuded confidence about strong the demand environment globally,” Nuvama added.