Aarti Industries, Atul: Emkay prefers 2 specialty chemical stocks, sees up to 34% upside
The brokerage added that as India enters the last year of the quota determination period, higher channel inventory and potential pressure from new capacity additions are likely to weigh on domestic prices.
- Sep 20, 2025,
- Updated Sep 20, 2025 3:53 PM IST
Specialty chemical companies are grappling with multiple challenges, including geopolitical tensions and uncertainty around US tariffs, brokerage Emkay Global said in a recent note. Overall exports in the second quarter were muted, with the US witnessing clear pre-buying ahead of the tariff announcement.
“Tariff is applicable on a number of major products exported to the US, like R32/R125 for SRF, NFIL, and GFL, on MMA for Aarti, and on 2,4-D for Atul,” the brokerage said. Q2 is typically a weak period for most non-agri specialty chemicals, though Emkay expects the second half of the year to be stronger for most players.
Emkay said it remains cautious on refrigerant gas makers, citing signs of peaking prices in export markets, particularly in the US. “Ref gas prices have been rising on account of higher demand, which is owing to regulatory changes and phase-out plans globally from beginning-CY25. However, domestic prices remain firm as it is the off-season for most gases,” it said.
The brokerage added that as India enters the last year of the quota determination period, higher channel inventory and potential pressure from new capacity additions are likely to weigh on domestic prices. “Thus, in our view, the near-to-medium term upside for Indian refrigerant gas players is limited – higher pricing is already factored in the current market price,” Emkay said.
On the bulk chemicals front, Emkay highlighted that prices had been under pressure due to weaker crude oil, overcapacity, and a muted macro environment. “Prices of major raw materials for Aarti, Atul, and Deepak Nitrite have corrected ~20-30 per cent YoY, leading to pressure on finished product pricing as well as potential inventory write-offs,” the brokerage said.
However, Emkay expects some stabilisation. “We see price stabilisation for MMA, liquid epoxy resin, and soda ash, and an increase in phenol and 2,4-D prices. We expect the demand scenario to improve, leading to better prices,” it added.
Q2 is seasonally weak for most bulk chemicals, excluding chemicals for agricultural applications. “Heavy/prolonged monsoons have slowed down manufacturing activity as well as capacity ramp-up. This, coupled with weaker exports due to pre-tariff buying in Q1, is likely to impact Q2 results of some companies,” Emkay said, adding that a detailed preview will be released in the first week of October.
For its coverage universe, the brokerage prefers bulk chemical companies like Atul and Aarti, expecting a gradual recovery in coming quarters. “H2 is expected to be better than H1 for most players,” it said.
Among stocks, Atul (Buy, target price Rs 8,500) offers the highest potential upside of 34 per cent, with FY28 P/E estimated at 21.1x and RoE at 12.2 per cent. Aarti Industries (Buy, TP Rs 450) also stands out with a projected 15 per cent upside, trading at a reasonable FY28 P/E of 17.1x and RoE of 12.2 per cent.
Specialty chemical companies are grappling with multiple challenges, including geopolitical tensions and uncertainty around US tariffs, brokerage Emkay Global said in a recent note. Overall exports in the second quarter were muted, with the US witnessing clear pre-buying ahead of the tariff announcement.
“Tariff is applicable on a number of major products exported to the US, like R32/R125 for SRF, NFIL, and GFL, on MMA for Aarti, and on 2,4-D for Atul,” the brokerage said. Q2 is typically a weak period for most non-agri specialty chemicals, though Emkay expects the second half of the year to be stronger for most players.
Emkay said it remains cautious on refrigerant gas makers, citing signs of peaking prices in export markets, particularly in the US. “Ref gas prices have been rising on account of higher demand, which is owing to regulatory changes and phase-out plans globally from beginning-CY25. However, domestic prices remain firm as it is the off-season for most gases,” it said.
The brokerage added that as India enters the last year of the quota determination period, higher channel inventory and potential pressure from new capacity additions are likely to weigh on domestic prices. “Thus, in our view, the near-to-medium term upside for Indian refrigerant gas players is limited – higher pricing is already factored in the current market price,” Emkay said.
On the bulk chemicals front, Emkay highlighted that prices had been under pressure due to weaker crude oil, overcapacity, and a muted macro environment. “Prices of major raw materials for Aarti, Atul, and Deepak Nitrite have corrected ~20-30 per cent YoY, leading to pressure on finished product pricing as well as potential inventory write-offs,” the brokerage said.
However, Emkay expects some stabilisation. “We see price stabilisation for MMA, liquid epoxy resin, and soda ash, and an increase in phenol and 2,4-D prices. We expect the demand scenario to improve, leading to better prices,” it added.
Q2 is seasonally weak for most bulk chemicals, excluding chemicals for agricultural applications. “Heavy/prolonged monsoons have slowed down manufacturing activity as well as capacity ramp-up. This, coupled with weaker exports due to pre-tariff buying in Q1, is likely to impact Q2 results of some companies,” Emkay said, adding that a detailed preview will be released in the first week of October.
For its coverage universe, the brokerage prefers bulk chemical companies like Atul and Aarti, expecting a gradual recovery in coming quarters. “H2 is expected to be better than H1 for most players,” it said.
Among stocks, Atul (Buy, target price Rs 8,500) offers the highest potential upside of 34 per cent, with FY28 P/E estimated at 21.1x and RoE at 12.2 per cent. Aarti Industries (Buy, TP Rs 450) also stands out with a projected 15 per cent upside, trading at a reasonable FY28 P/E of 17.1x and RoE of 12.2 per cent.