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Mixed results amid continued industry-wide challenges

While the overall supply-demand scenario in the world chemical industry remains unfavorable, some companies will likely report significant yoy improvement in results, supported by an easy base, front-loading of customer orders and ramp-up of specific growth projects. However, there is a risk that earnings growth decelerates in the coming quarters as these tailwinds fade away. We see maximum risk to earnings estimates for UPLL and ARTO.

Specialty chemicals: Mixed results, with risk of deceleration ahead

While the chemicals sector fundamentals remain soft, some companies should benefit this quarter from (1) front-loading of orders by customers ahead of the threat of US tariffs, (2) ramp-up in specific growth projects, (3) firmness in prices of HFC refrigerants due to regulatory constraints on production and (4) an easy year-ago base. SRF and NFIL should benefit from firmness in HFC prices and easy yoy comparisons. In contrast, PI faces a tough year-ago base and hence a slowdown in CSM revenues despite tariff-led front-loading. ARTO and DN will likely remain under pressure—despite a recovery in phenol spreads for DN—whereas ATLP should see some improvement as its epoxy resins and caustic soda expansions scale up. AETHER's performance should be supported by an easy base and ramp-up of shipments to Baker Hughes.

Farm inputs: Slow season, slow topline growth

The early arrival of the monsoon has perked up sentiment around the Kharif season, even as agrochemical channel inventories have normalized somewhat. The quarter is also seasonally large for seeds; higher acreages of corn should help seed companies. From our coverage, we expect RALI to report 15% EBITDA growth yoy, driven by continued growth in cotton hybrids and recovery in agrochemicals off a depressed base. GOAGRO’s EBITDA growth of 13% should be driven by higher prices and volumes of palm oil. BYRCS should benefit from good growth in corn hybrids, but we are more circumspect about its growth prospects in agrochemicals. UPLL's results will likely be the weakest, owing to currency headwinds and challenges in LatAm (including write-offs of receivables from a large distributor).

Maximum earnings downgrade risk for UPLL, ARTO; VO, NEOGEN also at risk

Compared to Bloomberg consensus for FY2026E, our EPS estimates are lower by 10% or more in the cases of UPLL, ARTO, NFIL and NEOGEN. In each of these cases, except for NFIL, we see risk of downgrades to consensus. For NFIL, the near-term firmness in R-32 prices may lead to upgrades to our FY2026E EPS, but the spate of new R-32 capacities lined up by Indian companies in the next 1.5 years is a risk. Besides these names, we also see the risk of downgrades to our own FY2026E EPS for VO, based on the subdued results we expect for 1QFY26. Visibility for FY2027 is currently rather limited in the backdrop of uncertain global macros. Valuations in general are very stretched even on optimistic FY2027E expectations. Our preferred picks are more reasonably valued names such as ACUTAAS, SHKL and GOAGRO.

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