Up to 37% upside? Nirmal Bang picks 3 specialty chemicals stocks to buy

Nirmal Bang Institutional Equities has resumed coverage on specialty chemicals space. Navin Fluorine International Ltd (NFIL), Fine Organic Industries Ltd  and Galaxy Surfactants Ltd are its three preferred picks from the sector, with up to 37 per cent potential upside. 

While the sector has underperformed over the last three years and the era of basket rerating is behind us, Nirmal Bang said select pockets have definitely become stronger than a decade ago and hence rightfully trading at premium valuation.

"Players in the differentiated value chains/technologies or processes have fared better than the rest of the peer set. We believe commoditisation of specialty is the new bug in the system and only players who continue to reinvent and move up the value chain will be the clear winners in future as well," Nirmal Bang said. 

The domestic brokerage said apart from the adversities caused by geopolitics, ‘China+1’ factor did not play out as per the ‘hope story’ painted over the years as aggressive dumping continues.

While Nirmal bang acknowledged the potential tailwinds of the Anti-Involution Policy, it believe the development should not be misread as just capacity closures by China. China’s deeper in-roads in Agchem formulations and downstream derivatives have left no choice for Global Innovators from the West  to re-think their entire strategy, Nirmal Bang said.

"We believe serious process edge and excellent sourcing arrangements is the recipe to coexist in ‘me too’ products market with China," it said.

Navin Fluorine share price target

For Navin Fluorine, Nirmal Bang has set a target price of Rs 10,000 apiece. The brokerage sees the company as a key beneficiary of value-added platforms, with more than 75 per cent of revenue coming from global innovators. It highlighted the company's exposure to the pharma CDMO segment, where NFIL is expected to cross the $100 million revenue milestone in FY27, while its Advanced Materials business provides additional medium-term growth potential.

The brokerage expects Navin Fluorine's revenue, Ebitda and adjusted PAT to grow at a compounded annually of 23 per cent, 26 per cent and 34 per cent, respectively, over FY26-28E. 

Fine Organic share price target

For Fine Organic, Nirmal Bang has a target price of Rs 6,300. The brokerage highlighted its customer-centric solutions, oleochemical R&D capabilities and indigenous engineering technology. It expects the company's capacity constraints to ease with the commissioning of its Navi Mumbai SEZ plant and the planned US manufacturing facility. The Navi Mumbai project alone could increase capacity by 66% from the existing base, with a significant earnings step-up expected from FY29.

Galaxy Surfactants share price target

Galaxy Surfactants, with a target price of Rs 3,200, is another key pick. Nirmal Bang noted Galaxy Surfactants' leadership in oleochemicals for the home and personal care segment, along with growing focus on value-added products and deeper penetration in developed markets. The brokerage expects consumption recovery, premium products and new launches to support growth from FY27, with volume and Ebitda growth of 9 per cent and 23 per cent, compounded annually, over FY26-28. 

The brokerage said the broader specialty chemicals sector remains challenging due to soft demand and aggressive Chinese competition, making differentiated value chains, strong customer relationships, process capabilities and healthy balance sheets increasingly important.