80 chemical stocks down over 25% from 52-week highs; analysts see buying opportunity in these shares

At the time when the benchmark equity indices BSE Sensex and NSE Nifty are hovering at their record high levels, as many as 85 stocks from the chemical space are still down over 25 per cent from their respective 52-week high price. However, market players are bullish on a couple of them as they think that India is now on a solid footing with ongoing investment momentum which shall accelerate growth further.

With a fall of 68 per cent, Vikas WSP emerged as the top loser in the list. Shares of the company declined to Rs 1.90 on November 30, 2022 against its 52-week high of Rs 6.01 which it scaled on January 12, 2022. Deepak Polymers, Omkar Speciality Chemicals, Mangalam Organics, Sreechem Resins, Seya Industries, Valiant Organics, Daikaffil Chemicals India, Resonance Specialties and Vivid Global Industries have also lost over 50 per cent so far from their respective 52-week highs.

While retaining its bullish view on the sector, Centrum Broking said India's rising domestic consumption story remains intact. It believes India to remain a favourable destination for chemical exports due to labour cost advantage, regulatory compliances, favourable policy measures, strong technical or synthesis capabilities and Indian entrepreneurs’ drive for global presence.

The sector has already turned an investment of Rs 1 lakh to up to Rs 4 crore during the past 10 years. Among the major gainers, shares of Jyoti Resins surged 43,475.82 per cent to Rs 1321.80 on November 30, 2022 from Rs 3.03 on November 30, 2012. It was followed by Sadhana Nitro Chem (up 22,743 per cent), Paushak (up 11,672 per cent), Alkyl Amines Chemicals (up 9,908 per cent), Deepak Nitrite (up 8,055 per cent), Navin Fluorine International (up 7,335 per cent) and Tanfac Industries (up 6,540 per cent).

Apart from the China+1 strategy, the chemical industry’s previous decade's growth was also driven organically by some policies in later years including a reduction in the corporate income tax rate in 2019, customs duty reduction and BIS standards implementation, among others. “We believe further policy support from lower tax rate for newly formed companies at 15 per cent, development of PCPIRs, feedstock availability and expected PLI scheme in chemicals would foster growth for the chemicals sector,” Centrum Broking said.

Market watchers also believe that the Chinese chemical industry is expected to face challenges due to government focus on capacity rationalisations, environmental protection and a move towards lowering carbon footprint. Indian chemical sector has benefitted over the last decade and now stands on a strong footing to serve the global market.

Considering the present market situation, Centrum Broking is positive on Aarti Industries with a target price of Rs 716. It is also bullish on Atul Ltd (Target price: Rs 9,480), Deepak Nitrite (Rs 2,325), Galaxy Surfactants (2,749), Gujarat Fluorochemicals (Rs 4,376), Navin Fluorine (Rs 5,244), SRF (Rs 2,624) and Vinati Organics (Rs 2,451).

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