Review of 12 Speciality Chemicals stocks with Buy, Hold & Reduce Recommendations by ICICI Securities

(Note: All prices are in INR/kg; Q2FY24-TD numbers have data for the month of Jul’23 only) 1) SRF: R-22 prices dipped to INR 321/kg (down 8.3% QoQ) in Q2FY24-TD, volumes were down 18.4% YoY to 770te. In packaging films segment, spreads have improved from lower levels in BOPET and BOPP. 2) Gujarat Fluorochemicals: PTFE prices rose 2.3% QoQ / 8.8% YoY to INR 1,052 while volumes dipped 41.5% YoY to 694te. Other fluoropolymer prices rose 1.7% QoQ and volumes dipped 10.6% YoY to 286te. 3) Archean Chemical: Bromine volumes were negligible thus the data is irrelevant. SOP prices dipped 19.2% QoQ. 4) Clean Science: Q2FY24-TD volumes in guaiacol dipped 74.4% and prices fell 15.4% QoQ to INR 303, while phenol prices declined 15.0% QoQ to INR 77. 5) EPL: Gross profit can improve with drop in LLDPE prices, but optically revenue growth may appear soft. 6) Sudarshan Chemical: Pigment prices were down 5.9% QoQ and volumes were down 17.9% in Q2FY24-TD. 7) PCBL: Carbon black export prices were down 1% QoQ to INR 105, but export volumes were up 38.2% YoY.

SRF Ltd: R-22 prices dip; packing films spreads improve

 R-22 prices dipped 8.3% QoQ (up 7.5% YoY) to INR 321 in Q2FY24-TD. Fluorspar (acid spar) prices increased 0.9% QoQ / 16.1% YoY to INR 44. R22 spread (to fluorspar and chloroform) stood at INR 213 vs INR 241 in Q1FY24. R-22 prices dipped to INR 321, down 7.0% MoM, in Jul’23. Export volumes were down 18.4% YoY to 770te.

 MDC (methylene chloride) prices rose 68.1% QoQ / 44.4% YoY to INR 79 on very small volumes which makes the data irrelevant. India has added large capacity, and has turned net exporter. Export price was stable at INR 43 in Jul’23 vs Q1FY24. Methanol and chlorine prices have dipped in Jul’23 vs Q1FY24, which implies a slight improvement in spreads.

 NTCF prices were down 6.8% QoQ / 33.9% YoY to INR 87 in Q2FY24-TD. Caprolactam prices dipped 16% QoQ / 32% YoY to INR 120. NTCFcaprolactam spread was negative at INR 33 vs a negative INR 50 in Q1FY24. Notably, NTCF import volumes rose 13.3% YoY to 6.8kte.

 BOPET prices were up 4.3% QoQ / down 18.0% YoY to INR 133. PTA prices were down 0.6% QoQ / 18.8% YoY to INR 66, and MEG prices were down 0.5% QoQ and 1.9% YoY at INR 43. BOPET-PTA/MEG spread rose 10.6% QoQ and down 20.4% YoY to INR 61 (vs INR 55 in Q1FY24). On MoM basis, spread rose 11.2% to INR 61 in Jul’23.

 BOPP prices fell 2.0% QoQ / 21.2% YoY to INR 145 while polypropylene (PP) prices dipped 7.3% QoQ / 9.0% YoY to INR 79. BOPP-PP spread rose 5.2% QoQ / down 32.1% YoY to INR 66 (vs INR 62 in Q1FY24).