Brokerage house ICICI Securities estimates its specialty chemical coverage universe revenue to grow at 42% year-on-year (YoY) during Q3FY22 on sharp rise in prices due to input cost inflation. Its top stock picks in the specialty chemical space are Gujarat Fluorochemicals, Tatva Chintan Pharma Chem and Chemplast Sanmar.
Under its preview report for the third quarter on specialty chemicals, the domestic brokerage and research firm sees gross profit of its coverage to grow 29% YoY which indicates strong underlying trend led by robust growth for SRF on pricing benefit in ref-gas, and Gujarat Fluorochemicals on turnaround in fluoropolymers.
ICICI Securities’ Buy recommendations include specialty chemical makers Gujarat Fluorochem (target price: ₹3,086), Chemplast Sanmar (target price: ₹940), EPL (target price: ₹290), Sudarshan Chemical (target price: ₹668), Tatva Chintan Pharma (target price: ₹2,920), and Phillips Carbon Black (target price: ₹300).
The brokerage has ‘Hold’ ratings on SRF with a target price of ₹2,010, Rossari Biotech (target price: ₹1,300) and Galaxy Surfactants (target price: ₹2,875), whereas it has ‘Reduce’ stance on Navin Fluorine (target price: ₹3,100) and Clean Science & Technology (target price: ₹2,110).
Further, it believes that Rossari Biotech will benefit from acquisition. Also, Tatva Chintan and Clean Science’s gross profit to grow steady at 25% on a yearly basis each, while Navin Fluorine growth is restricted on pending new capex commercialisation. Galaxy Surfactants would see gross profit decline YoY on continued challenge from unavailability of key raw material and logistic issues, the note stated.
Key to watch out, as per ICICI Securities, would be SRF commentary on sustainability of ref-gas prices, Navin Fluorine progress on capex, and Gujarat Fluorochemicals’ execution in PVDF and battery chemicals.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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