A commodity that is widely used in most sectors including pharmaceuticals, FMCG, consumer durables, agriculture, real estate, amongst others is chemicals. The chemical industry remains a niche market with good long-term opportunities and is forecasted to grow at 13 percent CAGR over 2019-25.
Stocks of chemical companies that have continued to deliver excellent returns are Vinati Organics, Aarti Industries, and Deepak Nitrite. With a market capitalisation of Rs 10,000 crore, Vinati Organics in the last 10 years gave nearly 3,200 percent returns, which is the highest in the sector.
Meanwhile, India’s largest chemical company Tata Chemicals in the last 10 years only delivered 139 percent returns. Among midcaps and smallcaps, Aarti Industries have given 1,874 percent returns in a span of 10 years, while Deepak Nitrite has risen 1,268 percent since January 25, 2013.
This year, the sector has mostly remained stable with its financials and ratios.
The sector’s return on equity (RoE) is currently at 14.74 percent as compared to 13.52 percent last year. EBITDA margin rose to 18.62 percent from 17.48 percent in 2018. Total debt/equity has come down to 0.3 from 0.46 last year.
The gross sales of 156 companies in the sector until now this year have been Rs 91,732 crore while net sales came in at Rs 89,363.91 crore, up 10 percent this year. Meanwhile, the net profit surged 24.4 percent to Rs 9,428.49 crore this year.
"With higher tariffs in China, exports have become more competitive as more investment is coming into India. In the long run, the prices will normalise and this is an opportunity for other countries to grab market share as China is shifting focus towards more value-added products," said Vinati Saraf Mutreja, MD& CEO of Vinati Organics.
In the July-September quarter this year, Deepak Nitrite's (DNL) bottomline climbed 532 percent, to which Equentis maintained a 'buy' rating on the stock. It said, "Going ahead, we expect DNL to benefit strongly from the healthy outlook for the Indian chemicals industry, which is growing at 8-10 percent annually."
Firstcall Research, in its recent report, said, “During FY19, alkali chemicals have the largest share in the chemical industry, 69 percent of total production, while polymer accounts for the remaining 59 percent. The sector is on the verge of rapid growth in the coming years due to increasing population and employment opportunities.”
The market size of the domestic agrochemical sector is expected to reach $8.1 billion by FY25. The specialty sector is expected to increase by about 10 percent annually to almost double the size by FY25, the report added.
First Published: Nov 29, 2019 1:56 PM IST
