IGI Logo

We expect Q1FY26 results to be better YoY for most companies (due to the lower base) and mixed QoQ, owing to multiple geopolitical events and tariff-led uncertainty—1) refrigerant business to continue to benefit from the higher-pricing environment globally and robust demand. 2) Generic/patented agrochemical players have shown resilience, amid China’s dumping pressure, and are expected to log decent volume growth YoY on completion of destocking and bottoming out of the agrochemical cycle. 3) Bulk chemical companies are expected to see muted results, with relatively slower pick-up in discretionary demand. Domestic demand remains resilient vs exports demand. SRF, NFIL, and PI are expected to report relatively stronger numbers. DN, GFL, Aarti, and Atul would log muted results, with the remaining players likely registering stable performances. We have a BUY on Atul, Aarti, Epigral, GHCL, and Vishnu; an ADD on SRF, NFIL, and ANURAS; a REDUCE on PI and DN, and a SELL on GFL.

Q1FY26 results—Key expectations (Exhibits 1, 2, and 3)

SRF (SRF IN): SRF’s chemical business (CB) should see strong revenue growth of 35% YoY, primarily led by volume growth in fluorospecialty business and a lower base effect compared to Q1FY25. The company should also benefit from higher volumes/realization in its refrigerant gas business. Specialty chemicals would fare better YoY, owing to a recovery in the agrochemicals segment and a ramp-up in recently commissioned facilities. CB EBIT margin is likely to improve to ~26% (vs 20.7% YoY) on better operating leverage. The packaging films business (PFB) continues to grapple with demand-supply imbalance in BOPET. The recent fire incident at a competitor’s plant may lead to a faster ramp-up of unused capacities. BOPP export realizations are akin to Q1FY25 levels.

PI Industries (PI IN):

PI’s CSM business revenue is likely to grow ~12% YoY in Q1FY26E, on a higher base, with QoQ growth surging to 42%. PI has witnessed a price correction of up to 7-8% in pyroxasulfone vs last year, while volumes are stable. The decline in pyroxasulfone is offset by new and existing molecules. We expect a decent ramp-up in non-pyroxasulfone revenues YoY. The domestic agrochemical business should grow 15% YoY on early rainfall and better sowing. CSM export EBIT margin is likely to inch up to 32% vs 31% YoY, on better operating leverage.

Gujarat Fluorochemicals (FLUOROCH IN):

GFL is expected to post flattish revenue QoQ, due to stable volumes in fluoropolymers and refrigerant gas businesses. The domestic fluorochemicals business (refrigerant gas) could see higher volumes YoY on the baseline determination period and seasonality. Specialty chemicals business should have remained stable during the quarter. We expect EBITDA margin to be stable QoQ. Also, price improvement in R-22 should aid margins. Battery chemicals business has not contributed yet, even to Q1FY26E numbers.

Deepak Nitrite (DN IN):

Revenue is likely to dip 6.2% YoY, owing to lower phenolacetone realizations in Q1FY26E. We expect revenue to remain flat QoQ, on volume growth/recovery in the advanced intermediate (AI) business offsetting the realization decline in the phenolic segment. We expect a flat gross margin in Q1, as phenol-acetone spreads remain under pressure, while better volumes in AI business would nullify the decline. This shall keep absolute EBITDA flat QoQ. Advanced intermediate (AI) business revenue is expected to grow 9% QoQ, led by better performance in the basic intermediates business due to volume ramp-up in Q1. We believe margins for the AI business will improve to 9% in Q1FY26E due to better operating leverage.

Navin Fluorine International (NFIL IN):

NFIL’s high-performance products (HPP) vertical would log a better quarter, with 39% YoY growth mainly due to healthier refrigerant gas realizations, commissioning of additional R32 capacity, and stable contribution from the Honeywell contract (lower base in FY25 to lead to YoY improvement). Specialty chemicals and CDMO businesses should post better performances, given higher contributions from key molecules. We forecast specialty chemicals revenue at Rs2.3bn (up 41% YoY, but down 12% QoQ) and +5% QoQ growth for the CDMO business. Improvement in the business mix, aided by operating leverage, to provide ~25-26% margin in Q1FY26E.

Atul (ATLP IN):

We expect Atul to post a sequentially flat quarter (+9.5% YoY), led by muted exports growth due to front-loading by customers in Mar-25 prior to US’ tariff announcement in Apr-25. We expect YoY growth to be led by ramp-ups in liquid epoxy resin capacity and the caustic soda plant. We expect growth in the life science chemicals business at 5% YoY and for performance and other chemicals business at 12% YoY. We build in EBITDA margin of 16.8% in Q1 (flat YoY/+140bps QoQ), taking into consideration the higher contribution from caustic soda plant. PAT is expected at Rs1.3bn (+15% YoY/-2.4% QoQ).

Aarti Industries (ARTO IN):

We expect Aarti to report EBITDA of Rs2.6bn vs Rs3.1bn YoY, on lower realization in its energy business (led by MMA), compared to Q1FY25, while the core portfolio is showing a gradual recovery from the agrochemical cycle. Geopolitical events and overall volatility could keep Q1 results sequentially flat. Aarti’s discretionary portfolio continues to perform better than the non-discretionary one in the domestic market. Export performance (excluding MMA) showed some weakness in Q1FY26. In our view, Aarti’s Q1FY26E EBITDA margin should decline a tad, on better cost-optimization measures being implemented, offset by a higher share of energy business (impacting margins).

Epigral (EPIGRAL):

Epigral’s chlor-alkali business contribution to remain largely flat in Q1FY26E, on slightly lower ECUs offset by volume growth (ECUs of caustic soda are in the range of Rs32-33/kg). The derivatives and specialty chemicals business is likely to report ~5.5% decline in revenue YoY due to a slower ramp-up of CPVC capacity being marginally offset by the increase in ECH prices. We expect EBITDA margin to be rangebound at ~26% (which is within the guided-to range). Epigral will see the benefit of a lower tax rate of 25% in FY26E vs 34-35% in FY25, as MAT credit has been completely utilized.

Anupam Rasayan India (ANURAS IN):

We expect Anupam to report revenue growth of 70% YoY, amid a recovery in export revenue in Q1FY26E, as execution of the order book starts picking up. We expect an increase in contribution from LoI-based revenue in Q1FY26E. We expect margins to come in slightly above the 26-28% guidance (Emkay: 31%, given operating leverage). We believe that the higher number of working capital days will start tapering off in FY26E, with inventory getting cleared and higher revenues. PAT for the company should be ~Rs250-300mn, based on our estimates.

GHCL (GHCL IN):

GHCL’s consolidated revenue is expected to see a marginal decline of 1.2% QoQ/7% YoY because of stable volumes and lower realizations in Q1FY26E (due to cheaper imports despite the minimum import price (MIP) restriction). We expect soda ash prices to be stable in the coming quarter. We believe lower soda ash prices in Q1 likely had little impact on the EBITDA margin. Absolute PAT is expected to be flat at ~Rs1.4bn (-4% QoQ/YoY) due to the higher tax rate.

Vishnu Chemicals (VCL IN):

We expect Vishnu’s consolidated revenue to be flat QoQ, considering a muted export environment due to the US’ tariff situation; domestic demand, though, remained robust in Q1. Chromium business’ export volumes improved in Q1 vs weaker exports of barium chemicals. The marginal realization decline in chromium business will be offset by the volume ramp-up in barium chemical business. We expect EBITDA of Rs515mn, with ~13.1% EBITDA margin. PAT to be ~Rs280-300mn.

For More  Emkay Global Financial Services Ltd Disclaimer http://www.emkayglobal.com/Uploads/disclaimer.pdf & SEBI Registration number is INH000000354