Midcaps Q3 Results Preview - Specialty Chemicals Likely To Deliver A Mixed Performance: Nirmal Bang

Nirmal Bang Report

We present Q3 FY23 preview of our midcap coverage universe. We have divided our coverage universe into three sections: 1. specialty chemicals, 2. specialty ingredients and 3. others.

We expect Q3 FY23 to be a mixed bag for chemicals companies as there are multiple variables at play such as fall in commodity prices, recessionary trends across the world, rising Covid-19 cases in select countries etc.

Spreads of the commodity businesses had started to normalise from Q2 FY23 and hence we expect soft earnings for select companies.

From our specialty chemicals coverage, Navin Fluorine International Ltd., Vinati Organics Ltd. and Clean Science and Technology Ltd. are expected to report good numbers. New product launches, capacity additions and higher realisations of select products for each of these companies could result in better earnings compared to the rest of the pack, in our view.

Relatively lower growth estimates for SRF Ltd. are due to weakness in its packaging films and technical textile businesses where there is an unfavorable base and spread contraction.

Other than specialty chemicals in our midcap universe La Opala RG Ltd. should maintain quarterly revenue run-rate similar to Q2 FY23. CCL Products India Ltd.’s growth would be driven by its Vietnam operations while its India business might see some moderation due to capacity shutdown in Oct-22 for maintenance activities.

Mold-Tek Packaging Ltd.’s food and fmcg portfolio is expected to report strong growth; its paints segment is expected to be soft due to destocking by select companies.

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