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ICICI Securities Report
Indian chemical companies' valuations did not reflect downcycle, and have been expensive, while estimates have dropped significantly. However, we believe the normalisation of inventory can help in driving higher volumes for Indian specialty chemical companies, and higher operating leverage can drive faster earnings growth.
Our estimate suggests EPS growth of over 25% CAGR in the next three years (FY24- 27E) though on a low base. Assuming valuation sustain, or even slightly derate, investors can make decent returns, in our view.
Our stock preference order is Navin Fluorine International Ltd. (Buy), Chemplast Sanmar Ltd. (Add) and SRF Ltd. (Add) while Atul Ltd. is least favoured among direct beneficiaries. We like both Archean Chemical Industries Ltd. (Buy) and Tatva Chintan Pharma Chem Ltd. (Buy) who are indirect winners.
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