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Impressive print…

Q4FY21 earnings for specialty chemical companies under our coverage are expected to be impressive on low base of Q4FY20; and recent rise in chemical (particularly crude derivative) prices which may lead to inventory gains. We expect SRF’s chemical business EBIT to grow 52% YoY on strong show in fluorospecialty chemicals and rise in realisation for ref-gas, while its packaging film business continues to enjoy strong spreads.

Navin Fluorine’s earnings are likely to benefit from strong growth in specialty chemicals and CRAMS segment, and soft fluorspar prices. Galaxy Surfactants’ volumes would be steady though its revenues would be optically higher on higher lauryl alcohol prices while margins would be lower as conversion is likely to remain steady. Rossari Biotech’s strong revenue growth in HPPC is expected to continue, but margins may slightly shrink on rise in raw material prices. We expect Sudarshan Chemical’s EBITDA to benefit from strong exports, rise in realisation, and operating leverage.

* Expect SRF’s chemical business EBIT to grow 52% YoY to Rs2.4bn. SRF’s chemical business revenues are likely to grow 25% YoY on continued strong momentum in fluoro-specialty chemicals and rise in realisation for ref-gas as indicated by the company. Chemical business’ EBIT margin may expand 100bps QoQ to 22%. Packaging film revenues may grow 38% YoY on new capacity addition and higher realisations, while BOPET and BOPP spreads are likely to remain strong. EBITDA is estimated to grow 65% YoY to Rs6bn on strong performance and low base; we expect net profit at Rs3.5bn, up 91% YoY.

* Navin Fluorine’s EBITDA to rise 39% YoY to Rs932bn. We estimate revenue growth of 20% YoY led by 30% and 35% growth in specialty chemicals and CRAMS. Ref-gas revenues are likely to dip 4% YoY on lower realisations while inorganic fluoride segment may see 10% jump on strong demand from steel sector. Margins stand to benefit from better mix and soft fluorspar prices. Net profit is expected to decline 74% due to absence of one-off tax benefit that was there in the base quarter.

* Galaxy Surfactants’ EBITDA may rise 27% YoY to Rs1.3bn. We expect volume growth at 6.7% YoY led by normalisation of demand in India, steady growth in AMET, and recovery in RoW; thus specialty care products volume growth to be healthy at 8% YoY. Revenue growth would look very high on higher lauryl alcohol prices while margins would be optically lower. Net profit growth is likely at 44% YoY to Rs902mn.

* Rossari’s net profit expected to grow 30% YoY to Rs195mn. We expect revenues to grow 30% YoY to Rs2bn on the back of 55% growth in HPPC and 10% in textile chemicals, while animal health and nutrition is expected to dip 10%. Gross profit margins may shrink 360bps YoY on base having the benefit of higher sanitiser sales and rise in raw material prices.

* Expect Sudarshan Chemical’s net profit to grow 58% YoY. We expect revenues to be 16% YoY higher led by strong exports and higher realisations. Company has likely commercialised its yellow pigment product, which may be added to sales. We are factoring-in stable gross profit margin owing to rise in raw material prices (crude derivatives). Operating leverage is likely to help drive higher EBITDA margin at 16.1%, up 40bps QoQ. EBITDA growth is likely to be at 55% YoY to Rs835mn.

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