The Indian rupee has repeatedly hit new lows and breached the psychological level of 80 per dollar for the first time ever last week. The falling rupee makes imports more expensive, but it provides an excellent chance for export-oriented industries. And one such sector to benefit from it is Specialty chemicals. Stocks in the sector have risen in recent months, with several reaching all-time highs. Aside from the weaker rupee, supply interruptions, the China+1 strategy, and an increase in global demand have all aided the sector.
India’s Specialty chemicals sector is well poised to capitalise on global tailwinds and expand its global market share to 7-8% in the next few years from 4% currently, this is mainly due to the ‘China Plus One' strategy, Business Insider reported quoting sharekhan report.
Since China constitutes about 20% of the global Specialty chemical industry ($800 billion), even a 5% shift in market share from China to India can translate to an $8-billion opportunity for the Indian Specialty chemical companies, the report said.
In their earnings previews, domestic brokerage firms including Prabhudas Lilladher, ICICI Securities, and Motilal Oswal predicted that chemical firms would perform well on the back of price hikes. Companies have raised their prices multiple times as a result of rising raw material, energy, and logistic cost. So far, certain stocks have outperformed brokerage expectations in the June quarter.
SRF posted strong numbers for Q1FY23 and beat analyst expectations. The company's revenues were up 44% YoY to ₹3894.7 crores in Q1, led by the chemical segment, which was higher by 55% YoY to ₹1722.4 crores. The operating profit of the Chemicals business increased 134% from ₹222 crore to ₹520 crore in Q1FY23. In other segment revenue, the packaging films business reported an increase of 44%, the technical textiles business reported an increase of 16% in Q1 and other businesses reported an increase of 97% in the corresponding period last year.
It reported a 53.8% year-on-year (YoY) increase in consolidated profit after tax (PAT) of 608 crore compared to 395.3 crore in the corresponding period last year.
On July 21st, 2022, the company received approval for the project for capacity expansion and modernization of Belting Fabric Operations at a cost of Rs. 162 crores.
After a solid Q1 result, several brokerages turned bullish on the company. ICICI Securities retains its 'Buy' rating on the stock with a target price of ₹2,735/share, which hints toward the upside potential of 13% from the closing price.
On the other hand, Edelweiss has also maintained a 'buy' call on the stock with a revised target price of ₹2,850, an upside of 17.76% from the previous closing price.
Shares of SRF Ltd. closed at ₹2,420.30 on the BSE in Thursday's trade. Earlier in the day, the stock saw a gap-up start to the session. The stock has delivered a return of 2.09 per cent in the last one week and a return of 56.02 per cent in the last one year. Over the last 3 years, the market price of the stock has zoomed by 340.45 per cent.
| Consolidated Financials ( ₹in Cr) | SRF | Navin Fluorine | Gujarat Fluorochemicals | |||
| Q1FY23 | Q1FY22 | Q1FY23 | Q1FY22 | Q1FY23 | Q1FY22 | |
| Total Revenue | 3,904.6 | 2,713.2 | 408.4 | 335.4 | 1,360.2 | 938.3 |
| Operating Expenses | 2,899.8 | 2,027.8 | 298.4 | 248.7 | 875.1 | 656.8 |
| Operating Profit | 995 | 671.5 | 99.1 | 77.8 | 458.9 | 255.1 |
| Profit Before Tax | 841.6 | 534.9 | 94.4 | 74.2 | 409.2 | 206.3 |
| Net Profit | 608 | 395.3 | 74.5 | 55.9 | 306.3 | 153.8 |
| Basic EPS Qtr (Rs) | 20.5 | 66.7 | 15 | 11.3 | 85.2 | -12.3 |
Gujarat Fluorochemicals was another stock that posted good numbers. As per Trendlyne, the company's operating revenue of ₹1,360 crore in the June quarter was one of the highest in the industry. However, even after posting strong quarterly numbers, the stock dropped almost 5.23% in the last two trading sessions.
Meanwhile, in Tuesday's trade, the stock hit an all-time high of ₹3,483.8 on the BSE. It is up 32.72 per cent year to date. The stock value has increased by 98 per cent in the last year.
Next on the list was Navin Fluorine. The stock touched an all-time high of ₹4349.90 on the BSE on Thursday intraday and ended at ₹4,278. In the last three trading sessions, the stock rallied 13.0% to ₹4,278.05 from ₹3,787.85.
The company reported a consolidated net profit of ₹74.45 crore, an increase of 33.2%. EBITDA grew 28% to ₹99.1 crore in Q1 FY23 from ₹77.8 crore in Q1 FY22.
JM Financial initiated a "buy" call on the stock with a target price of ₹5,090/share, which hints toward an upside potential of 19% from its previous closing price.
Domestic brokerage firm HDFC Securities also retained a 'buy' rating on the stock with a target price of ₹4,900/share.
Further, Edelweiss has also maintained a 'BUY' recommendation with a revised TP of ₹4,650/share, implying an 8.69% upside from the current share price.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
