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HDFC Securities Institutional Research Desk: Chemical Conference Report

Posted On: 2020-09-28 22:44:53

Mr. Nilesh Ghuge, Institutional Research Analyst, HDFC Securities & Mr. Harshad Katkar, Institutional Research Analyst, HDFC Securities.

HSIE Chemical Conference

We hosted a CXO-Chemical Conference-2020 and invited senior management of seven listed chemical and agrochemical companies and an industry expert.

The nationwide lockdown impacted operations of the majority of chemical companies in 1QFY21, but the pick-up was rapid in 2Q. Plants are currently operating at the utilisation of 70-90% of the pre-COVID level.

Plant utilisations of companies that cater to end-user industries engaged in essential services such as pharmaceuticals and agrochemicals are higher. Companies are continuing with their Capex plans despite the implications of the COVID-19 pandemic, owing to a positive demand outlook. Most of the companies believe that the Indian chemical industry is in a sweet spot given: (1) the opportunity arising out of 'China Plus One' policy of MNCs and the government, (2) rising domestic demand, and (3) export opportunity.

Domestic raw material availability for chemical and pharma companies will increase as downstream oil players start producing more petrochemical intermediates. The recently announced "Production Linked Incentive Scheme" for domestic manufacturing of critical Key Starting Materials/Drug Intermediates and APIs will support the growth of the chemical industry. The Indian government has been very proactive and is planning various policies which would act as tailwinds for the industry's long term growth. Indian chemical companies have to invest in technology, focus on backward integration, and collaborate amongst themselves to capitalise favourable macro. This corroborates our stance on the Indian speciality chemical companies (see our report link).

Aarti Industries and Alky Amines are our top picks amongst our speciality coverage universe.

Following is the participant list:

Aarti Industries - Mr Chetan Gandhi - CFO
Alkyl Amines - Mr Yogesh Kothari - C&MD, Mr Kirat Patel - ED
Balaji Amines - Mr Ram Reddy - MD
Bodal Chemicals - Mr Ankit Patel - ED, Mr Mayur Padhya - CFO
Galaxy Surfactants - Mr K Natarajan - ED & COO
Meghmani Organics - Mr Ankit Patel - CEO, Mr Gurjant Singh Chahal - CFO
Sharda Cropchem - Mr Ramprakash Bubna - C&MD
Daga Global Chemicals - Mr Satyen Daga (Industry Expert) - MD

Source: Equity Bulls

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