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Topline growth likely to be aided by recovery across sectors...

Since the start of Q4FY21, crude oil prices have gone up by ~35%, which percolated to many chemicals prices to reach considerably higher levels. Since there has been a lag impact of passing on higher input cost to end users, we expect our universe companies to have able to pass on meaningful increase during this quarter and thereby assist sustainability/improvement in gross margins. In terms of volume growth, since there has been restoration of demand across construction, auto, textile along with sectors being resistant during pandemic such as pharma, agrochemical, FMCG, it should likely have supported volume growth for most chemical companies during last quarter. We expect double digit volume growth for most companies under our universe. We expect majority of our coverage companies to report inventory gains on the back of higher end product prices, which should support better gross margins this quarter. Further, operating leverage can likely aid OPM for the quarter. In a nutshell, we expect our chemical universe to register topline growth of 26.1% YoY while bottomline is expected to grow 67.1% YoY in last quarter.

Topline growth likely to be 26.1% YoY, led by recovery across end user industries

We witnessed a recovery in demand for sectors such as textile, paper, metals, auto to name a few along with sectors immune to the Covid-19 impact such as agrochemicals, pharma, etc. This should support higher volume growth for most of our coverage companies especially from pigments, dyes, soda ash industries. Further, companies in specialty chemicals and that have large order backlog in place, should likely sustain similar momentum as witnessed in last quarter. We expect companies like PI Industries and Navin Fluorine to report strong revenue growth in CRAMS portfolio. Moreover, better rainfall during June in most parts of the country should have supported higher volume growth for most agri inputs thereby translating into a better performance for our agrochem universe pack last quarter. We expect our chemical universe companies to post topline growth of 26.1% YoY for Q1FY22.

EBITDA to grow at 38.6% YoY with bottomline at 67.1% YoY

Increase in the value added segment revenue from the basket of specialty chemical companies along with a rise in realisation for select companies can aid operational performance. We expect OPM of our coverage universe companies to expand 187 bps YoY to 20.8%, leading to EBITDA growth of 38.6% YoY. Bottomline growth can be aided by 67.1% YoY growth, largely on the back of lower tax outgo, higher other income along with a better operational performance.

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