Chemicals & Petrochemicals share price target

Dimethyle Amine (DMA) FOB prices witnessed a sharp 16% decline MoM /1.2% QoQ

Chemical manufacturers enjoyed multiple tailwinds in FY21 and FY22. Besides low raw material costs and high end-product prices, the China plus one strategy made global companies diversify their supply chain to alternative destinations, which helped Indian companies.

R-22 price rose to Rs333/kg (+11.3% QoQ) in Q3FY23-TD, but volumes were down 34.3% YoY to 0.8kte. In packaging films segment, spreads have contracted QoQ for both BOPET and BOPP, which should incrementally put pressure on SRF’s packaging films margin.

R-22 price rose to Rs299/kg (11.4% QoQ) in Q2FY23, but volumes were down 19% YoY to 2.6kte. In packaging film segment, spreads dipped QoQ for BOPET, while they improved for BOPP (BOPP spreads are helping SRF to protect packaging films' margin).

We anticipate strong revenue growth for the businesses we cover in the speciality chemicals sector, driven by healthy realisations across the board, while excellent volume growth is anticipated for a few names due to a pickup in demand.

We estimate our specialty chemical coverage universe revenue to grow 19.3% YoY (down 0.6% QoQ) in Q2FY23, partly on rise in prices due to input cost inflation. Gross profit to grow 22.7% YoY