Published on 14/11/2017 5:11:13 PM | Source: Equirus Securities Private Ltd
Chemical Sector Update - Equirus Sec
Takeaways from industry trends
* PAN players continue to report strong earnings growth: Given the lower raw material prices and increase in realizations for Pthalic Anhydride (one of the major raw materials in paints) Indian companies like IG Petrochemicals and Thirumalai chemicals reported strong increase in profitability during the quarter
* Both the players are looking to further increase their capacities given Asian Paints is shutting down its current facility to manufacture PAN which could lead to higher demand by domestic paint companies.
P-cresols and 2,4-D have witnessed significant price hikes: Given the increase in raw material prices major Indian players started taking price hikes in the segment post 4QFY17
* Prices in China for the products hadn’t increased in the products resulting in volumes not picking up for Indian players. Prices in China are expected to increase post 2QFY18 which could result in volumes picking up for Indian players
* The increasing realization trend was evident in numbers for Atul ltd where revenue growth is significantly higher as compared to last year
Chlor Alkali companies do well during the quarter: No major chlorine addition capacities are expected globally over the next 4 years which would lead to improved utilizations for Indian players
* China which accounts for 40% of global exports is also facing environmental issues leading to 1/3rd of the Chinese capacity facing periodic restrictions
* This has lead to higher prices of Caustic Soda, Caustic Chlorine and Chlorine derivatives. Strong results have been reported by companies like Meghmani Organics, Andhra Sugar which are beneficiaries of the same.
* Dyes & Dyestuff manufacturers will continue to do well: Given the issues in China pertaining to environmental clearance and increasing salience of Indian players in the dyes industry
* Besides that prices of key raw materials like H-Acid and Vinyl Sulphone are stable and should help the Indian players continue their profitable growth.
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