The Indian chemical industry contributes about 7 percent to India’s GDP, according to a report by IBEF. It covers more than 80,000 commercial products and is broadly classified into bulk chemicals, speciality chemicals, agrochemicals, petrochemicals, polymers, and fertilisers.
India’s chemical sector was estimated to be worth US$ 220 billion in 2022 and is anticipated to grow to US$ 300 billion by 2025 and US$ 1 trillion by 2040. Globally, India is the sixth-largest producer of chemicals and the third-largest in Asia.
Here are a few chemical stocks with huge capital expenditure (capex) plans:
Navin Fluorine International
Navin Fluorine International produces refrigeration gases, inorganic fluorides, and speciality organofluorines and offers contract research and manufacturing services. Its portfolio includes 50+ fluorinated compounds developed over the years.
The company has been expanding for a while now. Earlier this year, it approved a capital expenditure of ₹ 450 crore for a new 40,000 tonne per annum hydrofluoric acid capacity at Dahej, Gujarat. This is in addition to its existing capacity of 20,000 tonnes per annum in Surat.
With a market capitalization of ₹ 22,943 crores, Navin Fluorine is a mid-cap company. It has a low return on equity of 17.11 percent and an ideal debt-to-equity ratio of 0.39. Its shares were trading at a price-to-earnings ratio (P/E) of 63.33, which is higher than the industry P/E of 34.10, indicating that the stock might be overvalued as compared to its peers. Its shares were trading at ₹ 4628.90 apiece.
Neogen Chemicals
Neogen Chemicals manufactures bromine and lithium-based organic and organo-metallic compounds, used in the pharmaceutical, agricultural chemicals, and engineering industries.
The company is expanding its capacity across verticals, from inorganic chemicals to battery chemicals. Earlier this year, it said that it plans to spend ₹ 450 crores as an initial investment to set up 10,000 metric tonne electrolyte manufacturing capacity in India, following its exclusive technology transfer agreement with Mitsubishi Chemical Corp.’s subsidiary, MU Ionic Solutions Corp. This will be used to meet India’s upcoming demand from lithium-ion battery manufacturers.
With a market capitalization of ₹ 4,320 crores, Neogen Chemicals is a small-cap company. It has a low return on equity of 11.68 per cent and an ideal debt-to-equity ratio of 0.77. Its shares were trading at a price-to-earnings ratio (P/E) of 88.82, which is higher than the industry P/E of 34.10, indicating that the stock might be overvalued as compared to its peers. Its shares were trading at ₹ 1715.95
Dhanuka Agritech
Dhanuka Agritech manufactures a wide range of agro-chemicals like herbicides, insecticides, fungicides, and plant growth regulators in various forms liquid, dust, powder and granules.
The company said that it would spend ₹ 250 crores to set up a technical manufacturing plant at Dahej, aiming for backward integration and venturing into exports. This capital expenditure was expected to reduce the company’s import dependence by 20 percent to 25 percent. Earlier this month, the company announced the commencement of trial production at its new plant in Dahej, Gujarat, from August 8, 2023. This will provide raw material security and the benefit of backward integration in the form of lower raw material costs to the company.
With a market capitalization of ₹ 3,609 crores, Dhanuka Agritech is a small-cap company. It has a high return on equity of 27.55 percent and an ideal debt-to-equity ratio of 0.03. Its shares were trading at a price-to-earnings ratio (P/E) of 16.61, which is lower than the industry P/E of 25.94, indicating that the stock might be undervalued as compared to its peers. Its shares were trading at ₹ 787.80 on Thursday.
Written by Simran Bafna
Disclaimer
The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Dailyraven Technologies or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.
