ICICI Securities estimates its specialty chemical coverage universe revenue to grow 18% YoY (2.2% QoQ) in Q1FY23, partly on rise in prices due to input cost inflation. Gross profit to grow 20% YoY (+2.3% QoQ), which indicates strong underlying trend led by 1) SRF’s robust growth (41% YoY) on pricing benefit in ref-gas, 2) Gujarat Fluorochemicals’ (48% YoY) turnaround in fluoropolymers, and 3) Clean Science’s (38% YoY) on low base.

We expect Rossari (+68% YoY) to benefit from the acquisitions. Tatva Chintan’s performance was hurt from slowdown in auto sector (lower SDA sales). Navin Fluorine to have steady performance in the absence of HPP commissioning. Galaxy Surfactants’ volumes to dip on weakness in AMET, but EBITDA/kg to be healthy. Chemplast’s volumes to grow YoY on a low base, but PVC spread to be weak which implies steep drop in EBITDA QoQ.

PCBL’s gross profit/kg is expected to improve on the back of better India sales, and benefits in exports market. EPL and Sudarshan are likely to continue facing cost headwinds. Gujarat Fluorochemicals and PCBL are our top picks in the sector.

SRF’s chemical business EBIT to grow 149% YoY / 10% QoQ to Rs5.5bn. SRF’s chemical business EBIT will likely gain from steady growth in fluoro-specialty (on agro-chemicals cycle), strong price increase in ref-gas (HFC) and anti-dumping duty on HFC imports in India. Technical textiles were impacted from slowdown in auto while packaging films’ EBIT to be lower QoQ on dip in margin from rise in supply. SRF revenue to grow 31% YoY / flattish QoQ to Rs35bn; EBITDA to rise 46% YoY / 3.2% QoQ to Rs9.8bn. Net profit to grow 57% YoY / 2.4% QoQ to Rs6.2bn.

Navin Fluorine’s EBITDA to rise 31% YoY to Rs1bn. Revenue is likely to grow 31% YoY to Rs4.1bn. This would be aided by 30% YoY growth in CRAMS and 25% in specialty chemicals. Inorganic fluoride and ref-gas revenues to grow 45% and 30% YoY, respectively, on price increase. Gross profit / EBITDA margin may rise QoQ on better mix, and benefit of price increase. EBITDA / PAT may grow 31% / 37% YoY to Rs1bn / Rs772mn, respectively. Net profit QoQ dip on higher ETR.

Gujarat Fluorochemicals’ EBITDA may rise 56% YoY / 20% QoQ to Rs4bn. Caustic soda and chloromethane revenues to dip QoQ on lower prices, while ref-gas revenue to benefit from sale of R-125. PTFE will likely have higher volumes (Q4FY22 had maintenance shutdown) and new fluoropolymers to have higher capacity utilisation in FKM and PVDF on increased availability of R-142B. Gross profit margin to be stable. Net profit may rise 22.5% QoQ / 79% YoY to Rs2.7bn.

Clean Science’s net profit to grow 28% YoY / 11.7% QoQ to Rs697mn. We expect Clean Science’s revenue to grow across segments partly driven by price increases. Gross profit margin is expected to jump 150bps QoQ to 66.7%. It has taken price hikes in the past few quarters, and its key raw material prices have dipped. EBITDA is likely to jump 33% YoY / 13% QoQ to Rs946mn.

Tatva Chintan’s EBITDA to dip 15.7% YoY / 0.8% QoQ to Rs218mn. Revenues from PTC, electronic chemicals and PASC to grow strong in the absence of demand for SDAs which frees up capacity for other categories. SDA revenue to decline 31% YoY due to slower end-market off take particularly auto on chip shortage. Gross profit / EBITDA margin to dip QoQ from highs of Q4FY22, and lower SDA contribution. Higher ETR implies net profit dip 34% YoY / 12% QoQ to Rs153mn.

Galaxy Surfactants’ volumes to contract 4.4% YoY, on stress in AMET, to 57kte. India and RoW should see steady volume performance. This will drive specialty care volumes up 6% YoY. The realisation will further inch-up on rise in LA prices. Thus, revenue growth to be healthy 38% YoY / 8.2% QoQ to Rs11.4bn. This will likely make gross profit margin dip (optically) 350bps QoQ, and EBITDA margin by 190bps. EBITDA /kg to remain healthy at Rs23.2 (vs Rs25.2 in Q4FY22). Net profit to grow 12.7% YoY / down 12% QoQ to Rs866mn.

Rossari’s net profit to grow 7.7% YoY / 9.6% QoQ to Rs264mn. Rossari’s YoY figures are not comparable as Q4FY22 has numbers from merger of Unitop and Tristar. This should potentially add Rs1.8bn to revenue, which is included in the HPPC segment. Rossari’s consolidated revenue is expected to grow 98% YoY / 4.2% QoQ to Rs4.6bn, driven by a combination of volumes and price hikes. EBITDA should grow 52% YoY to Rs564mn, while EBITDA margin to slightly improve by 40bps QoQ to 12.3%.

EPL’s EBITDA to dip 1.4% YoY to Rs1.4bn. Though revenue is likely to grow 14.8% YoY, it would largely be on the back of higher feedstock price inflation. Revenue growth to come from AMESA segment (+15% YoY), Americas (+21%) and Europe (+20%), while EAP to grow slow due to restrictions (+5% YoY). Gross profit may be up 6.8% YoY to Rs5bn and EBITDA down 1.4% YoY to Rs1.4bn (due to higher operating cost). Net profit is likely to decline 11% YoY to Rs516mn. We expect EBIT margin improvement sequentially across segments with stable input cost and price increase for tubes.

Sudarshan Chemical’s EBITDA to rise 44% YoY / 4% QoQ. Revenue is expected to rise 35.3% YoY / 2.2% QoQ to Rs6.4bn, partly from price hikes to pass-on input inflation. Gross profit margin may improve 30bps QoQ to 41.1%; however, EBITDA would be impacted from higher power cost. We expect net profit to grow 74% YoY / 1.9% QoQ to Rs455mn.

Chemplast Sanmar’s EBITDA to dip 34% QoQ to Rs2.3bn. Volumes are likely to dip 6.4% QoQ on high base of Q4FY22 (seasonality) to 141kte. Revenue is estimated to dip 12.5% QoQ to Rs15.8bn on lower realisation. PVC spread is expected to shrink due to increase in supplies from China. Further, non-specialty realisation to decline from high base. Gross profit may be lower by 18.2% QoQ to Rs5bn. However, higher power cost will eat into EBITDA growth. Net profit should contract 47% QoQ to Rs1.2bn. YoY numbers to look healthy on a low base.

PCBL’s EBITDA to rise 2.9% YoY / 25.6% QoQ to Rs1.7bn. Volume growth to be constrained by capacity, and hence, grow only 3% YoY to 113kte. Realisation to be higher on input cost inflation and better realisation in exports market. Gross profit/kg to improve 8% QoQ (flattish YoY) to Rs30.2 on better domestic mix, higher spreads in exports market, rise in specialty mix and higher realisation for power (by-product). Net profit to grow 11.2% YoY / 31.5% QoQ to Rs1.2bn.

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