Nirmal Bang, a brokerage and research firm, stated in a note on the expectations of the earnings from the chemical sector that its coverage stocks are likely to see modest to healthy earnings growth, helped by revenue/EBITDA growth and margin expansion, driven by an increase in both product prices and volume.
According to the brokerage house, Tata Chemicals and PI Industries both experienced year-over-year (YoY) profit growth of more than 47%. The next two companies on the list are Sumitomo Chemicals (SCIL) and Anupam Rasayan (ARL), whose YoY PAT (profit after tax) growth rates are 15.1% and 8.3%, respectively. According to predictions made by the brokerage, PAT for Coromandel International is predicted to increase by 7.3% YoY, and PAT for UPL is predicted to decline by 1% YoY.
The target price for the chemical stock UPL is $1,154; for Coromandel International, it is $1,173; for PI Industries it is $4,213; for Tata Chemicals it is $1,254; for Sumitomo Chemicals it is $543; and for Anupam Rasayan it is $1,863.
Nirmal Bang predicts high single-digit PAT growth for Anupam Rasayan and Coromandel International. The report said, “We see reasonable traction for profitability in phosphatic fertilizer major CRIN and India-focused CPC firms.”
The brokerage’s key findings are that UPL anticipates a potential hit from higher interest costs and MTM losses in its foreign exchange loan due to the depreciation of the Indian rupee. Additionally, any weakness in the euro or the Brazilian real raises concerns about potential currency translation losses in sales in Europe and LATAM.
“PI Industries could experience strong CSM growth and domestic CPC business growth in the mid-teens, helped by new launches. Despite a modest 9% YoY sales growth, Sumitomo Chemicals India (SCIL) should produce significant YoY growth in margins and PAT.
Despite a possible QoQ decline in per tonne profit in soda ash due to the global downturn hurting important end-user groups, Tata Chemicals anticipates a robust increase in margins and PAT. Watch out for any variations in tax rates and the percentage of JV PAT compared to NBIE forecasts, too. Watch for trends in working capital, new orders, and supply chain management in the Small Cap CSM stock Anupam Rasayan (ARIL). Margin, depreciation/interest expenditure, and tax rate could all deviate from expectations, it said.
