Unlike street expectations, ICICI Securities see risk to NTCF (technical textiles for SRF) spreads in coming quarters due to significantly lower prices of imports, and 3x YoY jump in imported volumes. R-22 prices are stable at Rs192 while fluorspar prices are low. Packaging films (BOPET and BOPP) have seen stable to slight decline in margins and, considering SRF’s margin contraction in Q2FY22, we expect the spread to shrink in the coming months. Lauryl alcohol prices have risen significantly and LAB price increase, though relatively lower YoY, is fast catching up. Rossari Biotech’s key raw materials have seen sharp price inflation, which is now stabilising but at higher levels. Pigment prices too have increased, but are still lower than input inflation, which has resulted in contraction of margins for Sudarshan in Q2FY22. EPL should benefit from moderation in polymer prices in the coming quarters, while we have saw a marginal rise in Q2FY22 itself.

(Note: All prices stated are in Rs/kg)

SRF Ltd: Technical textiles’ margin may come under pressure

1. R-22 prices dipped 1.6% QoQ (up 4.1% YoY) to Rs192 in Q2FY22. Fluorspar (acid spar) prices were up 1.9% QoQ / down 12.4% YoY at Rs26. R-22 spread (to fluorspar and chloroform) was Rs87 vs Rs107 in Q1FY22. SRF is backward-integrated for chloroform; hence spreads should only be slightly lower. Sep’21 R-22 prices were at Rs193, up 2.9% MoM. R-22 export volumes for Q2FY22 declined 34% YoY to 3.2kte.

2. MDC (methylene chloride) prices rose 14.4% QoQ / 59.8% YoY to Rs53 while methanol and chlorine prices too have witnessed sharp inflation. Nevertheless, our analysis suggests SRF’s spreads / margins in MDC would have improved QoQ.

3. NTCF prices were down 25.7% QoQ and 46.2% YoY at Rs99 in Q2FY22. Caprolactam was up 11.4% QoQ / 103.6% YoY at Rs163. NTCF-caprolactam spread fell to a negative Rs64 vs negative Rs13 in Q1FY22. NTCF import volumes increased 3x YoY (79% YoY QoQ) to 23kte. This is contrary to street expectations of higher profitability for SRF in the technical textile segment (we fear sharp rise in imports can restrict domestic manufacturers’ pricing power / margins in NTCF).

4. BOPET prices expanded 1.7% QoQ / 14.0% YoY to Rs135. PTA rose 5.3% QoQ / 72.9% YoY to Rs57, and MEG prices were up 1.2% QoQ / 70.2% YoY at Rs49. BOPET-PTA/MEG were down 0.5% QoQ / 13.4% YoY to Rs70 (vs Rs70 in Q1FY22). However, on MoM basis, spreads were up 4.3% to Rs71 in Sep’21.

5. BOPP prices fell 3.5% QoQ / rose 37.6% YoY to Rs172 while polypropylene (PP) prices were down 4.5% QoQ / up 49.1% YoY at Rs97. BOPP-PP price spread was down 2.2% QoQ / up 25.3% YoY at Rs76. Spread in Sep’21 was only Rs67.

Navin Fluorine (NFIL): Rising input cost hurting NFIL margins

R-22 prices dipped 1.6% QoQ, but rose 4.1% YoY to Rs192. Fluorspar (acid spar) prices were up 1.9% QoQ / down 12.4% YoY to Rs26. R-22 spread (to fluorspar and chloroform) was Rs87 vs Rs107 in Q1FY22. NFIL should be negatively impacted from higher chloroform prices. This is in line with management commentary in Q2FY22 earnings call on rising input costs, and stable margins for ref-gas. 

Chemplast Sanmar: Exit prices were significantly higher for paste-PVC and lower for S-PVC

1. Paste-PVC prices were up 5.0% QoQ and 7.8% YoY to Rs119. Chemplast buys EDC for paste-PVC, which was up 1.9% QoQ / 234.3% YoY to Rs53. Paste-PVC – EDC spread stood at Rs32 in Q2FY22 vs Rs28 in Q1FY22. Paste-PVC prices in Sep’21 were at Rs136, up 30.3% MoM.

2. Suspension PVC (S-PVC) prices dipped 0.4% QoQ / 65.2% YoY to Rs98. VCM prices have dipped 17.1% QoQ / increased 57.3% YoY to Rs82. S-PVC – VCM spreads were at Rs16 in Q2FY22 vs nil in Q1FY21.

3. MDC (methylene chloride) prices rose 14.4% QoQ / 59.8% YoY to Rs53 while methanol and chlorine prices too have increased sharply. Chemplast uses its own chlorine, hence higher MDC prices will benefit Chemplast more compared to SRF.

4. Caustic soda prices were up 14.6% QoQ / 29.6% YoY to Rs30 (vs Rs26 in Q1FY22), and up 9.7% MoM to Rs33 in Sep’21.

Sudarshan Chemical (SCIL): Organic pigment realisation expanded 14.2% YoY

1. Organic pigment prices rose 1.5% QoQ / 14.2% YoY to Rs558 in Q2FY22 vs Rs550 in Q1FY22. Organic pigments are inclusive of all colours including CPC. Export volumes rose 14.2% YoY to 32kte in Q2FY22.

2. Azo pigment mixture prices rose 7.0% QoQ and 10.9% YoY to Rs463 vs Rs433 in Q1FY22.

3. Inorganic pigment prices were down 0.2% QoQ, but up 12.3% YoY to Rs104 vs Rs105 in Q1FY22.

Galaxy Surfactants (GSL): Lauryl alcohol prices were stable in Sep’21

1. Lauryl alcohol prices were up 2.5% QoQ and 74.4% YoY to Rs160, vs Rs156 in Q1FY22. Prices were at Rs157 in the month of Sep’21.

2. LAB (linear alkyl benzene), a petroleum-based surfactant, prices were up 11.3% QoQ / 56.9% YoY to Rs128. Clearly, inflation in petroleum-based surfactants has been catching up with oleo-chemical surfactants in the past few quarters.

Rossari Biotech: Input material prices stabilising at higher levels

Rossari has four key input raw materials – surfactants, acetic acid, acrylic acid and silicone oil.

1. Prices of lauryl alcohol, key basic raw material for surfactants, were at Rs160, up 2.5% QoQ and 74.4% YoY, vs Rs156 in Q1FY22.

2. Acetic acid prices increased 7.3% QoQ / 223.7% YoY to Rs78 in Q2FY22 (vs Rs72 in Q1FY22). In Sep’21, the price was Rs69, down 15.3% MoM, which means inflation has started declining in this product segment.

3. Acrylic acid prices have risen 10.8% QoQ / 74.1% YoY to Rs125 (vs Rs113 in Q1FY22). Acrylic acid was at Rs128 in Sep’21, up 3.0% MoM.

4. Silicone oil prices were up 4.7% QoQ and 35.4% YoY at Rs301 in Q2FY22 (vs Rs288 in Q1FY22 and Rs298 in Sep’21).

EPL Ltd: Polymer prices dip

Prices of LLDPE, a key input for laminates, were at Rs86, down 6.1% QoQ but up 36.2% YoY, vs Rs91 in Q1FY22 and Rs86 in Sep’21.

Vinati Organics

1. Ibuprofen prices declined 7.9% QoQ and 56.1% YoY to Rs1,144 (vs Rs1,241 in Q1FY22).

2. IBB prices increased by 8.2% QoQ (20.0% YoY) to Rs162 vs Rs150 in Q1FY22.

Atul Ltd

1. 2,4-D prices rose 11.0% QoQ and 39.2% YoY to Rs216.

2. Paracresol prices increased 5.3% QoQ and 8.0% YoY to Rs185.

3. Epoxy prices were down 2.7% QoQ and up 121.9% YoY at Rs346.

4. Resorcinol prices rose 18.5% QoQ and 15.6% YoY to Rs788.

Gujarat Fluorochemicals

1. PTFE prices were up 6.1% QoQ and 14.0% YoY to Rs779 (vs Rs734 in Q1FY22).

2. PTFE (to fluorspar) spread expanded 6.5% QoQ and 17.4% YoY to Rs710 (vs Rs666 in Q1FY22).