Investing is all about picking the right stock from the right sector and at the right time. Investors who picked quality stocks from the chemical space must be sitting on healthy gains at present. Data shows that at least 37 stocks in the sector have rallied more than 1,000 per cent in the past 10 years.
In addition to this, select stocks are favourites of the countryтАЩs biggest institutional investor Life Insurance Corporation (LIC) and well-known individual investors Ashish Kacholia and Radhakishan Damani.
With a rally of 18,693 per cent, Alkyl Amines Chemicals emerged as the top gainer in the list. Shares of the company climbed to Rs 3,008.75 on March 11, 2022 from Rs 16.01 on March 12, 2012. Jyoti Resins & Adhesives, Paushak, Sadhana Nitro Chem and Deepak Nitrite also gained between 12,000 per cent and 17,000 per cent, while the benchmark BSE Sensex rallied 216 per cent to 55,550 during the same period.
Insurance behemoth Life Insurance Corporation of India held a 3 per cent stake in Deepak Nitrite as of December 31, 2021. It also had over a 2 per cent stake in companies like Aarti Industries, Atul Limited, GHCL, Mysore Petro Chemicals, Oriental Carbon & Chemicals and Polychem.
Data further showed that players like Balaji Amines, Aarti Industries, Navin Fluorine International, Atul Ltd, Vinati Organics, Privi Specialty Chemicals, Thirumalai Chemicals, Dharamsi Morarji Chemical Company and Mangalam Organics have gained between 3,500 per cent and 7,500 per cent during the past 10 years.
Sharing its insights on the chemical space, brokerage Motilal Oswal Financial Services in a report said, тАЬAfter holding the centre stage for the past couple of quarters, amid high margins, high growth and China+1 prospects тАУ the multiples of most of the chemical companies have started contracting along with the EBITDA margin erosion.тАЭ
It further highlighted that the escalating Brent prices along with elevated key raw material prices contracted the gross margins of the speciality chemical companies under its coverage by as much as 14.4 per cent during April 2020-December 2021.
Motilal Oswal Financial Services further added that the dependence of Alkyl Amines, Atul, Deepak Nitrite, NOCIL and Vinati Organics are significantly high on crude derivatives, with benzene, toluene, and acetic acid being the key raw materials. However, it retained a тАШBuyтАЩ rating on NOCIL, Galaxy Surfactants and Vinati Organics.
The latest shareholding data available with BSE also showed that individual investor Ashish Kacholia held a 2.36 per cent stake in Yasho Industries and 4.81 per cent in Vishnu Chemicals as of December 31.
Yasho Industries is a manufacturer of aroma, antioxidants, rubber chemicals, specialty chemicals and lube additives.
Veteran Mumbai-based billionaire investor and founder of D-Mart Radhakishan Damani had 2.17 per cent stake in Mangalam Organics as of December 31.
Commenting on specialty chemicals space, Kotak Institutional Equities said, тАЬWe believe fundamentals of specialty chemicals companies continue to be strong. Valuations may see some correction as CoE reverts closer to pre-Covid levels. Companies are better placed to handle the current increase in crude prices (last seen in FY2013-14) given presence in more downstream products, volume-led growth and improved competitiveness versus Chinese peers.тАЭ
The brokerage further added that Aarti continues to be its top pick given visibility on volume led growth and multiples closer to pre-Covid levels. Kotak also likes SRF and believes any meaningful correction may provide good entry points.
