Speciality chemicals set for strong FY26, says Nuvama; top pick offers 27% upside potential

The speciality chemicals sector is poised for robust growth in FY26, with leading players well-positioned to capitalise on improving demand trends, completed capex and supportive government initiatives, according to Nuvama Institutional Equities.

Following its Specialty Chemicals and Healthcare Conference 2025, where it hosted the management teams of nine leading agri and speciality chemicals companies, Nuvama highlighted an upbeat outlook for the sector. The brokerage pointed to key growth drivers such as the Production-Linked Incentive (PLI) scheme, the Make in India push and favourable weather conditions.

"The chemicals sector is primed for strong growth in FY26, supported by improving demand, completed capex, better pricing and policy tailwinds," Nuvama stated. "Companies are strategically positioned to capture opportunities and enhance profitability over the coming years."

In the agrochemicals segment, the domestic brokerage noted a pickup in demand, driven by rising horticulture activity, changing crop protection patterns and a shift from insecticides to herbicides/fungicides. Moreover, low channel inventory and a forecast of a favourable monsoon have created a conducive domestic environment for technical and intermediate manufacturers.

Dhanuka Agritech has been identified as a potential outperformer. Nuvama has reiterated its 'Buy' rating on the stock, setting a target price of Rs 2,095. In Friday's session, the stock was trading 0.62 per cent higher at Rs 1,654.30, suggesting a potential upside of 26.64 per cent from current levels.

The brokerage noted several growth levers for Dhanuka, including the launch of two new products to strengthen its domestic footprint, a consistent brand-led strategy supporting margins and near-term operational scale-up at the Dahej facility. Additionally, the company's international business is set to benefit from recent additions to its fungicide portfolio. Changing crop patterns and strong volume indicators further support its bullish outlook.

Meanwhile, Nuvama also maintained a 'Buy' rating on Fine Organics, though it remained neutral on the stock from a sector-relative perspective. The management remains optimistic about long-term tailwinds across core categories and geographies. Nuvama has set a target price of Rs 4,931 for Fine Organics.