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We have a cautious stance on the Chemicals sector. Commentaries by global chemical companies suggest less visibility on price recovery and weak demand recovery for most segments (until H1FY26). However, some relief may materialize, subject to recovery in the Chinese economy and normalization of the agriculture season in Latin America. Deepak Nitrite is our top pick in the space – the company is expected to benefit from existing capex-led growth.

PAT to decrease 13% YoY and 17% QoQ in Q3FY25E led by volume growth: We expect Elara Chemicals universe to post a 13% YoY decline in PAT in Q3FY25E. Cumulative EBITDA margin may drop 131bps YoY and 112bps QoQ to 15.5%, led by price weakness in the exports market. Per government trade data, exports volume for companies within Elara Chemicals universe fell 6% YoY and 8% QoQ, while realization was flat YoY (down 3% QoQ). Companies such as Atul, Alkyl Amines, Balaji Amines and GFL are expected to witness a QoQ decline in both volume and realization.

Vinati Organics – Volume drop to impact EBITDA QoQ: We expect a 17% QoQ decline in Deepak Nitrite’s (DN IN) EBITDA led by weak exports market for phenol derivatives. Vinati Organics (VO IN) may post a 3% QoQ decline in EBITDA, led by weak demand from the oil & gas sector in the US.

Alkyl Amines and Balaji Amines – Falling sales and realization to impact EBITDA QoQ: We expect Balaji Amines (BLA IN) to post a 67% QoQ decline in EBITDA, based on muted demand of amines given weak agrochem demand. Similarly, EBITDA for Alkyl Amines (AACL IN) may dip 66% QoQ.

Fluorochemicals – QoQ earnings to be muted, except for Navin Fluorine: SRF (SRF IN) is likely to post a 12% QoQ deceleration in EBITDA due to flat exports demand and a 12% correction anticipated in realization due to oversupply in agrochem and refrigerants by China.  

Similarly, expect EBITDA growth for Gujarat Fluorochemicals (FLUOROCH IN) to be lower at 35% QoQ, given the additional headwind of weak demand in fluoropolymers. Navin Fluorine (NFIL IN) may see a 42% QoQ growth in EBITDA, led by higher realization and less dependence on agrochem as compared with SRF and FLUOROCH.

Aarti Industries’ (ARTO IN) EBITDA may improve 43% QoQ due to base effect from weak gasoline-naphtha spread (that partially recovered QoQ). Atul (ATLP IN) may post a 33% QoQ decline in EBITDA, led by a drop in volume. We expect Sudarshan Chemicals (SCHI IN) to post an EBITDA growth of 2% QoQ, led by higher realization and a drop in raw material prices partially offset by lower sales volume.

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