One largecap and one midcap chemical stock to buy, as per JM Financial


On a note on Indian chemicals sector, brokerage and research firm JM Financial said that amidst demand slowdown and high energy prices in Europe, contracted players provide high volume off-take visibility. Further, if any slowdown in offtake can be reversed in subsequent quarters. Hence, the brokerage house has prefered contracted players, SRF in the largecaps and Navin in the midcaps.

Barring contracted players, most chemical companies under the brokerage’s coverage are likely to demonstrate weak sequential sales growth (contraction in some cases), while contracted players such as Navin Fluorine and Anupam Rasayan are likely to report strong sequential sales, expects the brokerage. 

Moreover, fall in basic chemicals players should result in sequential margin improvement for a majority of companies under our coverage. Besides this, revival of the export incentives scheme should lift margin for all chemical companies from 4QFY23 onwards, it said. 

“SRF’s refrigerant gas sales are likely to be down sequentially while its fluoro specialty chemicals sales should continue the strong growth momentum, in our view. Navin Fluorine will benefit from strong ramp-up of HPP and specialty chemicals contracts,” the note stated.

PI’s domestic business will perform well owing to seasonality offsetting weakness in CSM business. Clean Science will benefit from price hikes amidst a ramp-up of newer products. The brokerage continues to prefer contracted players as they provide high volume growth visibility along with margin pass-through (with a certain lag in some cases). Its top stock picks in the chemicals space are SRF in largecaps and Navin fluorine in midcaps.

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

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