The brokerage firm ICICI Securities says that specialty chemical companies are expected to report weak earnings for Q4 FY23-24 as a result of weak demand and subdued pricing.
According to Emkay Global Financial Services, the demand for chemicals in the Q4 FY23-24 slowed due to channel inventory destocking and lower volume forecasts at the customer end in agrochemicals, as well as Chinese players’ desperation to reduce prices in order to gain more market share.
ICICI Securities estimates its specialty chemical coverage universe’s revenue to dip by 1.1 percent on a year-on-year basis (up 11.8 percent QoQ) in Q4FY24 amid weak demand and subdued pricing.
Further, the Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) is expected to decline 15.5 percent YoY (up 23.3 percent QoQ) on weaker spreads and operating deleveraging.
Here are some of the top five specialty chemical stocks with Q4 results preview:
Navin Fluorine International Limited
The brokerage expects the revenue of the company to fall by 21.5 percent on a year-on-year basis (up 9.1 percent QoQ) to Rs. 550 crore in Q4 FY24E as all segments decline on a YoY-basis, whereas, the net profit may dip by 66.1 percent to Rs. 46.3 crore.
High Performance Products (HPP) segment is expected to grow revenue 11.2 percent QoQ to Rs. 280 crore on seasonality, and higher off-take by Honeywell, but fall by 3.4 percent on YoY-basis.
The Chemical Contract Development and Manufacturing Organization (CDMO) revenue continues to underperform with rising only by 11 percent QoQ growth, but down by 60 percent YoY.
EBITDA margin may grow only by 160bp QoQ on a low base, but decrease by 12.3%ps on a year-on-year basis, while EBITDA may dip by 54.8 percent on a YoY-basis to Rs. 91.3 crore.
With a market cap of Rs. 16,183 crore, the company has delivered negative returns of about 12.2 percent in the past six months and nearly 26.7 percent in the last one year. So far, the company has given around 15.4 percent of negative returns in 2024.
SRF Limited
The brokerage expects the company’s chemical business EBIT margin to grow by 600bp QoQ in Q4FY24E, at 29.1 percent, compared to 35.2 percent in Q4FY23.
However, the net profit of the company is expected to decline by 19.5 percent YoY and rise by 78.6 percent QoQ to Rs. 450 crore.
SRF’s chemical business EBIT is benefiting from higher R-134a realisation, particularly in the US, and seasonality. Further, specialty chemicals will also benefit from seasonality, and higher off-take from new plants commissioned.
The brokerage estimates small growth in EBIT for technical textiles and packing films (on a low base), and recovery in packaging films appears to be more gradual than expected.
The revenue of the company may dip 3 percent YoY but rise by 20 percent QoQ to Rs. 3,700 crore, EBITDA could decline 10.9 percent YoY but increase by 46.7 percent QoQ to Rs. 830 crore.
With a market cap of Rs. 78,532 crore, the company has delivered positive returns of about 17.05 percent in the past six months and nearly 9.3 percent in the last one year. So far, the company has given around 7.5 percent of positive returns in 2024.
Gujarat Fluorochemicals Limited
Bulk commodity revenue is likely to fall by 30.1 percent YoY (up by 4.9 percent QoQ) due to lower prices for caustic soda and chloromethane in Q4FY24E.
Fluorochemicals revenue of the company to drop 35.2 percent YoY (up by 25.4 percent QoQ) on lower volumes in R-125, and Fluoropolymers revenue to decline by 16.2 percent YoY (up by 11.2 percent QoQ) on lower volumes, particularly in PTFE.
The company’s revenue is expected to dip by 22.2 percent YoY (up by 15.4 percent QoQ) to Rs. 1,140 crore, with Gross profit margin expected to rise up 50bp QoQ to 63.5 percent, and EBITDA margin maybe 23.7 percent (up 290bp QoQ) on higher revenue.
The net profit of the company may drop 70.1% YoY/up 23.8% QoQ to Rs. 99.1 crore which will be further hurt by higher depreciation or finance costs for recently commissioned battery chemical plants.
This mid-cap stock has delivered positive returns of about 22.8 percent in the past six months and nearly 11.8 percent in the last one year. However, so far, the company has given around 9.1 percent of negative returns in 2024.
Archean Chemical Industries Limited
The Q4FY24E revenue of the company is expected to dip by 10.1 percent YoY to Rs. 340 crore due to lower revenue for bromine at Rs. 94 crore, down 45.4 percent YoY/12.2 percent QoQ, as bromine business is hurt from the sequential decline in volumes.
Archean Chemical’s salt business continues to remain strong with revenue growth of 17.7 percent on a year-on-year basis, but the SOP volumes are expected to drop as the company has exhausted inventory.
As per the brokerage firm, the net profit may drop 42.6 percent YoY/22.8 percent QoQ to Rs. 78.4 crore, and the EBITDA will be at Rs. 120 crore, down by 40.9 percent/21 percent QoQ.
With a market cap of Rs. 8,120 crore, the company has delivered positive returns of about 1.15 percent in the past six months and nearly 7.3 percent in the last one year. So far, the company has given around 1.3 percent of positive returns in 2024.
PCBL Limited
The carbon black volume of Philips Carbon Black (PCBL) is expected to rise by 20 percent YoY to 143kte in Q4FY24E on the commissioning of the Chennai plant and due to the strong demand from exports.
The realisation of the company may be lower on a QoQ-basis due to a drop in input cost and spreads may dip QoQ on a high base.
The financials of Aquapharm Chemicals Private Limited, acquired by PCBL, will be consolidated for two months and may contribute Rs. 300 crore in revenue and Rs. 44.3 crore to EBIT.
Finance cost is estimated by the brokerage to rise due to Rs. 3,800 crore debt taken to fund acquisition.
Further, the company’s net profit is expected to rise 30.6 percent YoY (down 9.7 percent QoQ) to Rs. 130 core, restricted by higher depreciation and finance cost related to the Chennai facility and Aquapharm acquisition.
With a market cap of Rs. 10,465 crore, the company has delivered positive returns of about 35.4 percent in the past six months and nearly 137.5 percent of multibagger returns in the last one year. So far, the company has given around 8.1 percent of positive returns in 2024.
Written by Shivani Singh
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