Chemical Sector Q4 Results Preview - Slower Than Expected Demand Pick-Up: Dolat Capital

Dolat Capital Report

Chemical companies in our coverage universe are expected to report muted performance YoY with revenue/ Ebitda/profit after tax decline of 6%/ 25%/ 37%, though QoQ improvement is likely to be healthy +11%/ 19%/ 27% on-

1. volume pick-up in select end use applications like pigments, polymers, specialty additives,

2. seasonality benefits in applications like refrigerants, and

3. very weak Q3 base.

Recovery in Q4/H2 is slower than earlier guided/ expected by most managements. Cues from global management commentaries suggest that while the destocking narrative is gradually fading away, demand environment in H1 CY24 will remain challenging, and recovery is largely expected from H2 CY24.

Focus on working capital management, crucial capex prioritization and cost rationalization continues across the board, globally.

We expect QoQ earnings improvement from most companies under coverage, highest from Sudarshan Chemicals Industries Ltd. (+87% QoQ/ -16% YoY), SRF Ltd. (+56% QoQ/ -30% YoY). YoY remains soft on elevated base.

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