Specialty Chemical Q3 Preview— Continued Volume Growth To Drive Top-Line; UPL Among DRChoksey's Top Stock Pick

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DRChoksey Research Report

The agrochemical industry is witnessing strong volume growth, though partially offset by price reductions. Declining input costs are anticipated to support margin improvements going forward.

Overall, in Q3 FY25E our coverage companies will post high-teen revenue growth and strong profitability growth. Robust volume growth continues to be a significant contributor to overall performance across companies. This is due to increased demand in various sectors like pharmaceuticals, agrochemicals, and home/personal care.

Several companies are relying on new product launches to boost sales such as UPL, PI Industries and Vinati Organics.

Companies like Laxmi Organic Industries and Vinati Organics are expected to benefit from capacity expansions which will drive volume growth.

The pricing commentary across the companies is mixed. Companies such as Balaji Amines and PI Industries are experiencing pricing pressures in their end-user markets.

While other companies such as Supreme Petrochem, Gujarat Fluorochemicals and UPL are benefiting from stable raw material costs or increased demand leading to better price realization.

The key monitorable are-

1. New product launches,

2. Geographical Focus

3. Global demand and the pricing environment

4. Competitive pressures.

Our top picks are UPL (Better debt profile coupled with improved performance), Ami Organics (Continued top-line growth momentum driven by projects at various stages).

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