Buy Vishnu Chemicals Ltd For Target Rs. 650 By Emkay Global Financial Services Ltd
Vishnu Chemicals (VCL) reported Q1 EBITDA at Rs557mn (flat YoY/-13% QoQ), in line with our estimate. The Barium segment reported steady numbers, led by steady demand, although the Chromium segment was impacted by demand deferment (VCL maintained margins in this segment) amid USA’s tariff uncertainty. The mgmt highlighted that Barium segment products are part of the exempt list; however, tariffs are applicable on Chromium products (5% of overall revenue). Near-term headwinds persist amid ongoing tariff uncertainty, resulting in customers maintaining lower inventory. The company remains on track with strontium carbonate expansion and awaits approvals to operate its chrome ore mine in South Africa which would lead to backward integration. We retain BUY with a revised TP of Rs650 (rollover to Jun-27E EPS; earlier Rs600)
Chromium chemicals impacted by demand deferment amid tariff uncertainty
The Chromium chemicals business reported revenue of Rs2.6bn in Q1FY26 (+2% YoY/- 11% QoQ). Its performance was led by a higher share of domestic business, while exports remained flat YoY due to demand deferment amid tariff uncertainty. The chromium business is exposed to US tariffs at ~28% (last year’s sales to the US: ~Rs600mn; 5% of Chromium business). Customers remained cautious and hence maintained low RM inventory during the quarter. The gross margin for this segment remained in line with the FY25 average of 41.6% (chrome ore prices remained steady). Vishnu is still in the process of seeking statutory approvals from the South African government for its chrome ore mine. The mgmt expects approvals by Nov-25 and operations to start from FY27.
Resilient quarter for the Barium business
Subsidiaries (net of consolidated and standalone) recorded revenue of ~Rs844mn in Q1 (+5% YoY/-13% QoQ). Exports declined for the Barium business, offset by growth in the domestic business. Strong volume growth and improved realizations led to substantial improvement in the EBITDA margin by ~1,450bps YoY. The early onset of monsoons in India led to weaker demand from the paint industry, coupled with plant maintenance, leading to a sequential decline in revenue. Due to weaker domestic business, the management expects to divert volumes to international markets as Barium chemicals are exempt from US tariffs (FY25 sales to US: Rs440mn). The current utilization rate for barium carbonate and PBS is ~80% (VCL expects the plant to run at 90% in Q2).
Capex plans on track; focus on strontium carbonate in the near term
Vishnu incurred capex of Rs460mn in Q1FY26 (FY25: Rs880mn). We believe this was primarily led by the strontium carbonate project (12,000MT) and regular plant maintenance. Vishnu spent ~Rs520mn to acquire Jayansree Pharma. The company is undergoing trial runs for capex and expects commercial sales to start by end-Q2/earlyQ3 (meaningful revenue in CY26). Strontium carbonate is a cost-effective alternative to permanent magnets due to its properties; the fire incident at a competitor’s plant in Mexico (24,000MT) would boost ramp-up following the plant’s commercialization.
For More Emkay Global Financial Services Ltd Disclaimer http://www.emkayglobal.com/Uploads/disclaimer.pdf & SEBI Registration number is INH000000354
