From Tata Chem, PI to UPL: What Nirmal Bang expects from chemical stocks’ Q3

Market


Sharing a note on the expectations of the earnings from the chemical sector, brokerage and research firm Nirmal Bang said that its coverage stocks are likely to see modest to healthy earnings growth, aided by revenue/EBITDA growth and margin expansion, driven by an increase in product prices as well as volume.

The brokerage house sees PI Industries leading the sector with 47.5% year-on-year (YoY) profit growth followed by Tata Chemicals with a growth of 41% YoY. Sumitomo Chemicals (SCIL) and Anupam Rasayan (ARL) are next in line, with YoY PAT (profit after tax) growth of 15.1% and 8.3%, respectively. Coromondel International is expected to report a 7.3% YoY growth in PAT whereas UPL will likely see PAT dipping by 1% YoY, as per the brokerage’s estimates.

It has a target price of 1,154 on chemical stock UPL; TP of 1,173 for Coromandel International; TP of 4,213 for PI Industries; TP of 1,254 for Tata Chemicals; TP of 543 for Sumitomo Chemicals; and TP of 863 for Anupam Rasayan.

Nirmal Bang estimates high single-digit PAT growth for Coromandel International and Anupam Rasayan. “We see reasonable traction for earnings in India-focused CPC companies and phosphatic fertilizer major CRIN,” the note stated.

Key pointers, as per the brokerage, is that UPL sees a potential hit from higher interest cost/MTM loss in its fx loan due to INR depreciation; added concern is any weakness in EURO and BRL, which could result in currency translation loss in Europe and LATAM sales. 

“PI Industries should see robust growth in CSM and mid-teens growth in domestic CPC business, aided by new launches. Sumitomo Chemicals India (SCIL) should deliver healthy YoY growth in margins and PAT despite a modest 9% YoY revenue growth.”

For Tata Chemicals, it expects healthy growth in margins and PAT despite likely QoQ dip in per tonne margin in Soda Ash due to the global slowdown impacting key end user segments. “Also, watch out for any variance in tax rate and the share of JV PAT vs. NBIE estimates. In Small Cap CSM stock Anupam Rasayan (ARIL), look out for the trend in fresh orders and working capital as well as how it manages supply chain and costs. Potential variance from estimates could be seen in margins, depreciation/interest expense and tax rate,” it added.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.


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