B&K Securities is bullish on select stocks from the chemical space, which has already produced over 50 wealth creators in the past five years. The brokerage has a ‘Buy’ call on players such as SRF, BASF India, Gujarat Fluorochemicals, Aarti Industries and Atul Ltd. Historical data showed that Jyoti Resins & Adhesives emerged as the top gainer in the sector with a gain of over 5,800 per cent since October 2017. Shares of the company climbed to Rs 1,417.70 on October 3, 2022 from Rs 23.75 on October 3, 2017.
It was followed by Sadhana Nitro Chem (up 4,171 per cent), Punjab Alkalies & Chemicals (up 2,106 per cent), Alkyl Amines Chemicals (up 1,582 per cent) and Nikhil Adhesives (up 1,270 per cent). On the other hand, the benchmark BSE Sensex gained 80 per cent during the same period. In a report on October 3, B&K Securities said there were certain pockets in the chemical industry that may benefit from relative cost advantage in the near to medium-term and shift in manufacturing base or more outsourcing initiatives from European companies.
On the other hand, it added that domestic chemical companies, catering to industries where a demand slowdown is anticipated could witness tepid volume growth.
The brokerage further said that the unavailability of gas in Europe has sent ripples through the supply and value chain across industries.
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“Unlike what we witnessed in the past, due to environmental crackdowns in China, the current supply side disruption may not necessarily create pricing tailwinds as demand takes a plunge too. We also anticipate demand-led challenges amidst an inflationary environment and may weigh heavy on quasi-consumption chemical producers. We believe that bulk chemicals and contract manufacturers would continue to be in flavour,” B&K Securities said in a report.
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B&K Securities has fixed a target price of Rs 4,766 for Gujarat Fluorochemicals, indicating an upside of nearly 20 per cent from the current market price. It also believes that SRF may touch the target price of Rs 2,844, BASF India (Rs 4,405), Gujarat Fluorochemicals (Rs 4,766), Aarti Industries (Rs 910) and Atul Ltd (Rs 10,260).
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