IDBI Capital initiates coverage on specialty chemicals space with these 5 stocks; sees up to 35% upside

SRF: The brokerage has initiated coverage with a ‘buy’ call and a target price of ₹2,913, implying an almost 35% upside. SRF, with its superior R&D/technology capabilities and vast manufacturing footprint, has positioned itself as a partner of choice for global customers. Safely handling fluorine chemistry and other chemistries, along with its capex strength, further solidifies its reputation, said the brokerage. The company's massive investments of ₹15,000 crore lined up over FY24-28E in the specialty chemical space provides sturdy visibility and cement its position as a frontrunner in the specialty chemicals industry. SRF is well-positioned for continuous growth over the next 5-10 years, stated IDBI. It factors in an earnings CAGR of 18% over FY23-FY25E.

Navin Fluorine: The brokerage has initiated coverage with a ‘buy’ call and a target price of ₹5,200, indicating an around 21% upside. Navin's robust financial position has enabled them to actively execute multiple projects over the past couple of years, with investments exceeding ₹1,000 crore. The project pipeline consists of endeavors that involve advanced technologies and complex processes, showcasing their resilience. With growth visibility in mind, Navin is poised to sustain its capex momentum beyond FY23 by prioritizing the enhancement of its capabilities through the establishment of a new R&D/technology function. Rich fluorination capabilities and robust capex provide a long growth runway, said IDBI.

Clean Science and Tech: The brokerage has initiated coverage with a ‘hold’ call and a target price of ₹1,425, indicating a 10% upside. Clean formulates novel and superior chemical processes aided by solid R&D backed catalysts, which provide it with (1) superior product yields, (2) cost benefits (3) reduced effluent and end products toxicity, (4) lower effluent discharge and (5) ability to begin from cheaper and easily available raw materials. This mix of greener and competitively priced products is appealing to both domestic and international customers, providing it with scale advantages, eventually driving dominant market shares, IDBI rationaled. It has HOLD rating factoring in moderation in earnings over FY23-FY25E, implying CAGR of 13%.

Ami Organics: The brokerage has initiated coverage with a ‘buy’ call and a target price of ₹1,400, indicating a 21% upside. Strong order wins in the electrolyte additives segment would act as a major positive for the stock as the company has already sent samples to customers and has received approval from 6 customers. The company is also aiming to improve the performance of the specialty chemicals business both in terms of capacity utilization and margins, said the brokerage. It factors in an earnings CAGR of 26% over FY23-FY25E.

Neogen Chemicals: The brokerage has initiated coverage with a ‘hold’ call and a target price of ₹1,700, indicating a 7 upside.  Both advanced intermediates & CSM (pharma & agro as key customers) are expected to contribute healthy proportion of sales in the coming years and would remain solid growth drivers even beyond. AI & CSM are the two more profitable businesses and would drive improvement in profitability. However, in the light of valuations being rich, we initiate with a HOLD, it said.