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Time of India
3 days ago
- Business
- Time of India
Investing in these 3 chemical sector stocks can give good returns now as sector is reviving
After a lull of about three years, India's chemicals sector now appears poised for an upgrade. If you are looking for a contrarian investment strategy , then you might want to take a small exposure to this sector. Here's why. On a rebound The sector saw a marginal but noticeable improvement in performance during the January–March 2025 quarter. While much of the gain can be attributed to the low base effect, analysts remain optimistic. Of the 32 companies tracked by Reuters-Refinitiv (with estimates from at least two analysts), 19—or 59.3%—beat net profit expectations for the quarter. Anuj Jain, Co-founder of Green Portfolio PMS, says the March quarter results signal the beginning of an upcycle in the chemicals industry after a pause of nearly 2–3 years. Though valuations remain high for several large-cap stocks in the sector, many mid- and small-cap companies are still available at attractive valuations. A bleak past The chemicals sector has faced persistent headwinds over the past few quarters due to muted demand, weak realisations amid pricing pressures, inventory destocking in the agrochemicals segment, and heightened competition from China. Data compiled from the Reuters-Refinitiv database for 139 chemical companies with a market cap of more than Rs.100 crore shows dismal aggregate revenue growth of just 2% and 3.4% in the June and September quarters of 2024-25, on a year-on-year basis. Nearly 54% of these companies underperformed the Nifty 500 index over the last year, while 66% lagged the broader market benchmark in 2025 year-to-date. Live Events Brokers upbeat, but wary A pick-up in domestic demand for RACs (room air conditioners) and the sheer rise in demand for gas used in refrigeration and air conditioning is expected to bode well for the sector. While a B&K Securities report highlights that the weakening of competition from within the European Union will open up export opportunities for Indian companies, it also cautions against the continued threat of strong competition from China. On the other hand, a gradual recovery is expected in the agrochemicals segment, supported by the rising demand for newer, innovative products and biological alternatives. A Motilal Oswal report released in March 2025 notes that prices in the global crop protection industry are likely to bottom out in 2025 across all key regions and product segments, paving the way for a more stable growth trajectory ahead. The B&K Securities report notes that a sustained recovery in demand from the EU27 block is crucial to boosting the export growth potential of the Indian chemicals industry. It adds that with inventory de-stocking now largely complete in European markets, both demand and volumes are expected to drive growth going forward. Challenges The US trade tariffs, low-cost dumping by Chinese manufacturers, and weak demand in Europe remain some of the major concerns for the sector. An April 2025 Kotak Securities report expresses hope for a decent recovery over 2024–25 and 2026–27. However, in the event of a prolonged tariff war, it cautions that there could be more substantial downside risk to these expectations. Here are three companies worth considering for a small exposure. These firms have reported double-digit growth in net earnings for the March 2025 quarter and enjoy the highest level of analyst coverage within the sector. SRF Q4 revenue and net profit beat estimates by 7.4% and 9.3%. Strong performance in specialty chemicals, refrigerant gases, and packaging films. 2025-26 revenue guidance at 20% growth. Elara Capital maintains an 'accumulate' rating, expecting gains from recovering demand. Navin Fluorine Q4 revenue and EBITDA beat estimates by 2.4% and 7.9%. CDMO (Contract Development and Manufacturing Organisation) and high-performance products drove growth. Refrigerant gas demand and better pricing supported performance. Management targets ~25% EBITDA margin in 2025-26. Prabhudas Lilladher sees strong long-term growth potential. UPL Q4 revenue and EBITDA beat estimates by 3.6% and 9.9%. Growth is driven by strong volumes, and inventory normalisation. 2025-26 revenue growth guided at 4-8%, led by volumes. Recovery in key markets and new products to aid growth. Antique sees balance sheet improving and growth momentum continuing.
Time of India
12-05-2025
- Business
- Time of India
Steel Stocks: Uptick in domestic demand, dip in Chinese exports & dip in coal prices: will these push steel stocks up?
Revival in March 2025 quarter Safeguard duty Live Events Long-term catalysts Challenges Tata Steel The company's Indian operations constitute 75% of its consolidated sales. Such significant exposure to the domestic market will safeguard its business from the impact of US tariffs. Expected to report 6.4% quarter-on-quarter growth in EBITDA in the March 2025 quarter, according to consensus estimates of analysts compiled by Reuters-Refinitiv. The performance will be aided by coking coal cost benefits and marginally better realisations. The recent announcement of the transformation programme at Tata Steel Nederland (subsidiary) is expected to improve competitiveness in its Europe operations. The transformation programme will focus on cash flows by maximising production efficiencies, optimising product mix and controlling fixed costs. Motilal Oswal has a neutral rating on the stock and believes that the long-term outlook of the company remains healthy supported by its Indian and Europe businesses. Jindal Steel & Power It reported consolidated sales and EBITDA growth of 12.1% and 6% on a sequential basis in the March 2025 quarter. Improved volumes, higher capacity utilisation and inventory liquidation aided by strong domestic demand and lower coking coal costs supported the performance. The company reduced its net debt significantly by 11.8% quarter-on-quarter in the March quarter, supported by a reduction in working capital. The company's expansion at Angul (Odisha) will support volume growth in the future. The expansion is expected to be completed by the end of 2025-26. An Antique Stock Broking report says that cost savings from increased captive coal, slurry pipeline, and higher captive power would aid profitability in the future. It also lists a strong balance sheet and product mix improvement from capacity expansion as the key positives. JSW Steel It is expected to report a 15.9% quarter-on-quarter jump in consolidated EBITDA in the March 2025 quarter, according to consensus estimates of analysts compiled by Reuters-Refinitiv. The performance will be aided by project ramp-up, lower coking coal cost, and a marginal improvement in realisation. The management's focus on capacity expansion, cost optimisation, investments in renewable energy and logistics and increasing the share of value-added products will support growth. The recent Supreme Court's rejection of JSW Steel's insolvency resolution plan for Bhushan Power & Steel (BPSL) due to procedural lapses has created near-term uncertainty. Though analysts expect the company to file a review petition against the judgment, the near-term stock price movement is likely to remain volatile. Steel companies have battled headwinds in recent quarters amid global slowdown fears, rising Chinese imports, weak international demand, and oversupply. Between May 2024 and January 2025, Hot Rolled Coil (HRC) prices in India fell over 13%, according to Reuters-Refinitiv price contraction has affected the profitability of domestic steel companies. The EBITDA (Earnings before interest, tax, depreciation and amortisation) per tonne of domestic steel companies fell below the decadal average of Rs.10,000 per tonne, according to a recent note from CRISIL and pricing pressures are evident in the Nifty Metal Index, which delivered -7.2% returns over the past year, trailing the Nifty 50's 8.6% gain. The analysis is based on closing values from 6 May 2024 to 6 May expect steel companies to post improved quarter-on-quarter performance, driven by lower raw material costs. Spot coking coal prices averaged $186 per tonne in the March 2025 quarter—down 8.5% sequentially and 39.9% year-on-year, according to Antique Stock Broking. Lower input costs and a seasonal boost in construction demand are likely to support strong domestic government has recently imposed a 12% safeguard duty (following the proposal from the Directorate General of Trade Remedies) on select categories of flat steel imports for 200 days. The duty is expected to provide respite to the domestic primary steelmakers by reducing low-cost domestic steel prices have recovered sharply from January 2025 lows and gained over 13% (up to 2 May 2025). Analysts expect the duty to provide critical support to the domestic steel prices in the near term. 'With the duty intervention and relatively favourable input costs, the EBITDA per tonne of the domestic primary-steel makers is expected to recover by Rs.1,000-1,300 per tonne in 2025-26,' adds the CRISIL domestic demand for steel is growing at a healthy pace, aided by the infrastructure World Steel Association, in its short-range outlook (released in October last year) anticipates an 8% increase in steel demand in India for 2025. To cater to the increased domestic demand, the steel companies are expanding capacities and increasing value-added a softening of exports from China is expected to provide relief to the domestic steel companies. A recent HDFC Securities report expects Chinese steel exports to ease, as government stimulus and a stabilising real estate market boost domestic demand—providing further support to global steel there are positives, the ongoing global uncertainties could amplify challenges for the sector.'Concerns around oversupply in both the domestic and global markets, the slowing global GDP amid tariff uncertainty, and the possible devaluation of the yuan could put pressure on the steel industry,' says an Elara Capital CRISIL note says that even with the safeguard duty in place, a longer protectionist intervention may be required if a prolonged global trade war creates a significant imbalance in demand and prefer steel companies that are focused on the domestic market and have higher raw material integration. Tata Steel, Jindal Steel and Power, and JSW Steel are mostly preferred.
