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Published on 18/01/2020 3:35:18 PM | Source: Dolat Capital Market Pvt Ltd

Quarterly Chemicals Sector Overview By Dolat Capital

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Sector Overview

* Amid weak global conditions and profit warnings issued by global chemical companies, we expect Indian chemical companies in the DART universe to report moderate volume growth YoY in Q3FY20.

* The growth in FY19 was primarily due to higher realisations, which continued until Q2FY20, due to environmental concerns in China (after the blast in Jiangsu, China, in March 2019). We remain cautious about the volume growth in H2FY20 and have a positive view on the contract manufacturing business models.

* The chemical companies that earn about 50% of their total revenues from exports should continue to benefit from the depreciating rupee (rupee has depreciated 1.1% YoY and appreciated 1.3% QoQ in Q3FY20). This rupee depreciation, together with lower average crude oil prices, which is down 11.0% YoY to 60.2 US$/bl, may be a positive for organic chemical manufacturers. However, with the current uptick in crude oil prices (now at 70 US$/bl), we expect higher RM costs to dent margins in Q4FY20.

 

Quarterly Estimates 

 

Quarterly Estimates – Cont’d

 

Quarterly Estimates – Cont’d

 

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