Specialty Chemical stocks – Cyclical pain may aggravate: I-Sec

Cyclical pain may aggravate

I-Sec estimates its specialty chemical coverage universe’s revenue may dip 12% YoY in Q2FY24E due to destocking and weak demand. EBITDA is likely to decline 16.7% YoY on weaker spreads and operating deleveraging. 1) SRF’s EBITDA to dip 15.4% YoY due to pressure on revenue for ref-gas and fluoro-specialty, partly offset by QoQ recovery in packaging films and technical textiles; 2) Navin Fluorine’s EBITDA (+31%) may benefit from the commissioning of HPP plant and higher specialty / CRAMS revenue; 3) Gujarat Fluorochemicals’ EBITDA may decline (-55% YoY) due to lower ref-gas, bulk chemicals revenue and dip in fluoropolymers volume, 4) Clean Science (-17% YoY) is likely to be impacted by lower pricing in performance chemicals segment, but margin may remain healthy. 5) EPL (+14.3% YoY) to benefit from lower input prices, 6) Tatva Chintan’s performance may benefit from low base, while SDA sales are likely to be stable, 7) Galaxy Surfactants’ volumes may grow; EBITDA/kg may dip marginally, 8) Chemplast’s EBITDA to benefit from PVC spreads improvement, 9) PCBL’s volumes to grow, led by Chennai plant commissioning and a slight dip in gross profit/kg QoQ, 10) Sudarshan’s revenue to benefit from very low base, and margin to improve on lower input cost, 11) Rossari’s EBITDA may grow moderately, and 12) Archean is likely to see subdued demand in bromine volume; EBITDA may be stable YoY.

SRF’s chemical business EBIT to dip 25% YoY / 15% QoQ to INR 3.9bn

Chemical business EBIT margin to dip to 26.7% in Q2FY24E (vs 28.3% in Q2FY23). SRF’s chemical business EBIT may hurt from weakness in ref-gas both in pricing and volumes, and fluoro-specialty revenue may also dip YoY. Technical textiles and packaging films’ EBIT may grow QoQ on margin uptick in spreads and lower power cost in international operations. SRF’s revenue to dip 16% YoY / 6.2% QoQ to INR 31bn, EBITDA to decline 15% YoY / 6.6% QoQ to INR 6.5bn. Net profit to decline 32% YoY / 9.4% QoQ to INR 3.3bn. Key to watch out: Guidance for chemical business (earlier guidance: 20%).

Navin Fluorine’s EBITDA to rise 31% YoY (+7.9% QoQ) to INR 1.2bn

Revenue to grow 27% YoY to INR 5.3bn in Q2FY24E. This would be aided by 17% YoY growth in HPP to INR 2.5bn; higher QoQ revenue was due to shutdown of Honeywell plant in Q1FY24. Specialty chemicals’ overall revenue may grow 29% to INR 2.3bn on benefit of MPP-2 and dedicated agro-chemical intermediate plant; CRAMS revenue to grow 50% on low base. EBITDA margin may dip 20bps QoQ. EBITDA / PAT may grow 31% / 25% YoY to INR 1.2bn / INR 0.7bn, respectively.