While they come under the broad umbrella word of “Chemical sector” the fact is that it has three broad segments. Speciality chemical, Performance chemical or Commodity chemical. Each with its own operating matrix of supply chain and demand and also the valuations are different for each of them. In the last ten years, each of these segments have been going through a different cycle. But there is one common thread in all these segments, that is China. One news from China regarding whether it has started producing more of a chemical or there has been a shut down in any plant. The actual chemical prices and the stock price of the companies, both see wild swings. While it would be wrong to say that this will go away, over the long term there is a possibility that some segment in the chemical space will be able to delink and become less sensitive as more backward integration happens in that space. We look at the 5 stocks, where analysts have “hold” recommendations as
Chemical companies like Aarti, Jubilant, and Gujarat Fluoro are expected to recover with stronger earnings growth due to their capex investments. The sector has bottomed out, and emerging sectors like EV batteries and consumable industries show growth potential. Companies focusing on agrochemicals may still see one or two quarters of weakness because global agrochemical de-stocking is still continuing.
Deven Choksey favours UPL, ICICI Bank, HDFC Bank, and Kotak Mahindra Bank. He highlights the lack of clarity in Biocon s business and advises caution in the chemical sector. He suggests Whirlpool needs to improve its strategy to compete with domestic players. Companies in niche areas like Anupam Rasayan, Ami Organics, Laxmi Organics remain relatively stronger players.