Are you looking for multibaggers on Dalal Street? Analysts believe that the chemical sector will continue to give massive returns to investors on the back of a structural shift in China’s chemicals industry due to stricter environmental norms, tighter financing and consolidation.
Data shows that at least 50 stocks from the sector have already rallied more than 500 per cent in the past 10 years. On the top, Paushak has rallied the most 22,255 per cent to Rs 10,394.85 on January 10, 2022 from Rs 46.50 on January 10, 2012.
It was followed by Alkyl Amines Chemicals (up 21,987 per cent), Deepak Nitrite (up 17,093 per cent), Jyoti Resins and Adhesives (up 11,584 per cent), Sadhana Nitro Chem (up 10,453 per cent) and Balaji Amines (up 10,210 per cent).
According to YES Securities, the structure of China’s chemical industry is rapidly evolving due to stricter environmental norms and financial prudence and consolidation. These changes are primarily responsible for the widely touted ‘China+1’ narrative, as global chemical majors look for alternatives to China given the disruption in their supply chains. This presents a significant opportunity for domestic companies both in the short and long term.
“In addition to changing dynamics within China, trade disputes between China, US and EU have impacted trade and effected a shift in the global supply chain, which could again play to benefit of Indian companies,” YES Securities added.
Indian chemical industry estimated at $178 billion, is sixth largest in the world and fourth-largest in Asia. The industry manufactures more than 80,000 products for industries as diverse as textiles, agrochemicals, automotive and pharmaceuticals among many others.
Despite stupendous growth observed over the last decade, the industry continues to be fragmented and forms just around 3‐4 per cent of global chemical sales, significantly trailing China.
"Growing domestic consumer base, increase in disposable incomes, changes in lifestyle and supportive government policies are likely to propel the industry into a phase of superior growth, whereby the industry is expected to reach $300 billion by FY25,” YES Securities said.
Data further highlighted that players like Aarti Industries, Navin Fluorine International, Atul, Privi Speciality Chemicals and Vinati Organics have gained between 5,000 per cent and 10,000 per cent in the past 10 years.
From an investment perspective, Axis Securities likes SRF and PI Industries among large caps and Anupam Rasayan, Coromandel International and Sudarshan Chemicals in the mid-cap and small-cap space.
Yes Securities is positive on Aarti Industries, SRF, Rossari Biotech and Chemplast Sanmar in the chemical space.
CapitalVia Global Research is bullish on Deepak Nitrite. “The Indian specialty chemicals sector is currently one of the fastest-growing in the world (second only to China). The company has a large customer base serving over 900 clients in more than 40 countries and has good competitive positioning in most of its product categories,” the brokerage said.
Among other top gainers, Dharamsi Morarji Chemical Company, Thirumalai Chemicals, Alufluoride, Mangalam Organics, Oriental Aromatics, Tanfac Industries, Indo Amines and Fineotex Chemical have also surged over 2,000 per cent since January 2012.
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