India Speciality Chemicals - Q3FY22 Earnings Preview - YES Securities

Indian chemicals industry well poised to capitalize growth opportunity

Indian chemical industry estimated at USD 178bn, 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. Speciality chemicals which is a sub‐segment, forms ~ 20% of domestic chemical industry. Despite stupendous growth (~1.3x GDP growth) observed over last decade or so, the industry continues to be fragmented and forms just ~3‐4% of global chemical sales, significantly trailing China (~36% of global chemical sales). Nevertheless, 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 USD 300bn by FY25. In addition, as tougher environmental norms force Chinese manufacturers to retract from exports market, additional opportunity is opening up for Indian manufacturers.

Q3FY22 Earnings Preview

• Revenue growth (ex-financials & OMC) to grow by 19% y/y, primarily driven by Oil & Gas and IT. Revenue growth to remain in double digit mode even as the base effect normalizes.
• We see operating margins to increase by 40bps sequentially as commodity prices peak and companies endeavor to pass on costs. However, on y/y basis, operating margins are likely to contract by 103bps, the second consecutive quarter of contraction
• Adjusted PAT is likely to grow by 18% y/y, largely driven by strong performance from Oil & Gas and Real Estate. Automobiles to see steep contraction of 55%, hampered by supply side issues
• For Financials, NII growth is likely to be strongest in the last 5 quarters as credit offtake picked up during the festive season. However, PPOP (Operational performance) of NBFCS is likely to remain flat on y/y basis, translating into a meagre 7% growth despite a favorable base. PAT for Financials will grow at healthy 30% partially helped by lower provisioning

Source : Equity Bulls

Keywords

Q3FY22 EarningsPreview SpecialityCHemicals YESSecurities