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In 4QFY23, most chemical companies under our coverage are likely to demonstrate modest sequential sales growth; Anupam Rasayan, Archean, and Tatva Chintan will be exceptions as they could see fairly high sales growth QoQ. Moreover, i) fall in freight and power costs and ii) reintroduction of export incentives should help improve operating margin of almost all companies. For SRF, both refrigerant gas and fluoro specialty chemicals sales should continue the strong growth momentum, in our view. Navin will benefit from ramp-up of additional capacities from MPP and its dedicated agro intermediate plant. PI’s CSM sales is likely to be flattish sequentially. Anupam Rasayan’s ramp-up of new contracts is likely to play out in this quarter (after flattish sales growth in 3QFY23). Archean is likely to benefit from higher sales volume of salt and bromine. As highlighted in our sector report (click here), agrochemicalsfocused contracted specialty chemicals players are relatively better placed to weather the global slowdown storm. Top picks – SRF in large caps and Navin fluorine in mid-caps

* Navin’s EBITDA likely to see 7% sequential growth while SRF is likely to report 9% QoQ EBITDA growth: Navin Fluorine’s EBITDA is likely to grow 7% QoQ led by i) 3% QoQ sales growth owing to ramp-up of additional capacities of specialty chemicals and HPP contract, and ii) higher EBITDA margin at 28.6% (vs. 27.6% in 3QFY23). SRF’s 4QFY23 EBITDA is likely to demonstrate 9% sequential growth on account of i) favourable ref gas demand/pricing environment, ii) continued strong demand uptick in specialty chemicals, iii) sequential improvement in packaging films spreads, and iv) sequential decline in freight, and power costs.

* Modest quarter for PI; decent one for UPL: UPL’s 4QFY23 revenue is likely to see 6% YoY growth. It is likely to see strong growth in North America (up 8% YoY), and Latin America (up 8% YoY). Other regions such as Europe (up 4% YoY), and RoW (up 2% YoY) are likely to see decent growth. Further, EBITDA is likely to rise 5% YoY driven by lower freight and power costs. For PI, CSM revenue is likely to be flat (still up 20% YoY) while the domestic business is likely to show 4% YoY sales growth. As a result, its 4QFY23 revenue is likely to see 3%/20% QoQ/YoY growth. Moreover, on account of improvement in EBITDA margin to 26.8% (vs. 26.6% in 3QFY23), its EBITDA is likely to see 3.6%/43.4% QoQ/YoY growth

* Fine Organics’ EBITDA to see 4% sequential growth; Tatva Chintan’s EBITDA seen up 17% QoQ: We estimate Fine’s 4QFY23 sales to see a modest 1% sequential growth. Further, improvement in EBITDA margin (due to lower freight and power costs) is likely to result in a 4% sequential growth in EBITDA. For Tatva, we estimate 12% QoQ increase in 4QFY23 sales on account of sequential improvement in SDA sales along with ramp-up of new capacities (which came in on stream in Nov’22). Further, higher contribution of high margin SDAs along with moderation in freight and power costs are likely to improve EBITDA margin to 15.6% (vs. 14.9% in 3QFY23). As a result, Tatva’s EBITDA is likely to show 17% QoQ growth (still down 4% YoY).

* Strong quarter for Anupam; India Pesticides EBITDA to demonstrate 9% sequential growth: We estimate Anupam Rasayan’s 4QFY23 sales to show a strong 23% QoQ growth while its EBITDA margin could be sequentially lower on account of higher contribution from Tanfac. Despite this, its EBITDA is likely to grow 18% QoQ. For India Pesticides, we expect 2% QoQ sales growth. Further, sequential improvement in gross margin and lower operating costs should result in 9% sequential EBITDA growth.

* Clean Science to demonstrate 3% EBITDA growth; Galaxy’s EBITDA to moderate from high base: We estimate Clean’s 4QFY23 revenue to be flattish QoQ on account of weak demand environment for its products. However, on account of lower power and freight costs, EBITDA margin is likely to rise sequentially to 46.8% (vs. 45.5% in 3QFY23). As a result, its EBITDA is likely to rise 3% QoQ. For Galaxy, we have assumed a ~2% QoQ dro

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