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Export softness visible in the quarter

We expect 6% YoY growth in Q2FY26 results for companies under our coverage universe (due to the lower base for certain companies); however, we expect only marginal growth QoQ, given the export softness spurred by tariff-led uncertainty and the overall seasonally weak quarter for Indian specialty chemical companies. 1) Refrigerant business has continued better performance in the export market, while domestic market remains weak (due to off season); 2) generic and patented agrochemical players are seeing contract revisions and volume slowdown amid tariff uncertainty, with restocking seen only in select cases; 3) bulk chemical companies may report muted results, with pricing correction, given Chinese dumping and a weak demand environment. Domestic demand is more encouraging than export demand at present. We expect Aarti, GFL, and NFIL to report better numbers, PI, SRF, Vishnu, Epigral, and GHCL to have a muted show, while remaining players are likely to register stable performances. We have a BUY on Atul, Aarti, Epigral, GHCL, and Vishnu; an ADD on SRF and ANURAS; a REDUCE on PI, NFIL and DN; and a SELL on GFL.

Q2FY26 results—key expectations (exhibits 1, 2, and 3) SRF (SRF IN):

SRF’s chemical business (CB) should see strong revenue growth of ~32% YoY (flat QoQ), primarily led by volume growth in specialty chemical business and a lower base effect compared to Q2FY25. We are expecting improvement in realizations in the refrigerant gas business to partially offset volume loss due to early monsoon and weak OEM demand. Specialty chemicals will fare better YoY, owing to a recovery in the agrochemicals segment. CB EBIT margin is likely to improve to ~27% (vs ~18% YoY/ 27.3% QoQ) on better operating leverage. The packaging films business (PFB) continues to face supply pressure leading to lower sequential realizations. BOPET/BOPP export realizations are slightly better than Q2FY25 levels. The company announced a strategic partnership with Chemours in the quarter for its advanced fluoropolymers business.

PI Industries (PI IN):

PI’s CSM business revenue is likely to de-grow ~30% YoY in Q2FY26E, on a higher base (QoQ degrowth: ~20%). PI witnessed price correction in pyroxasulfone in Q1FY26 vs last year. The current quarter is likely to see pressure on pyroxasulfone volumes, given the US trade dynamics and pressure from generics as highlighted by the customer (Kumiai). The new molecules have also faced pressure in the export market. We expect non-pyroxasulfone revenue to decline YoY/QoQ. The domestic agrochemical business should grow marginally by 2% YoY on good monsoon/sowing. Biological sales are expected to have recovered in the quarter. CSM export EBIT margin is likely to fall to 28% vs 33% YoY, due to operating deleverage.

Gujarat Fluorochemicals (FLUOROCH IN):

GFL is expected to post decent doubledigit YoY growth in its fluoropolymers segment, given healthy PTFE exports. We have built 20% growth YoY. The domestic fluorochemicals business (refrigerant gas) could see better volumes YoY due to ramp-up of the new R32 capacity. We have built modest growth of 5% YoY. Specialty chemicals business should have remained stable in the quarter. Bulk chemicals have not seen any improvement in pricing in this quarter (expect 8% decline YoY). Battery chemicals business has not contributed to the topline yet.

Deepak Nitrite (DN IN):

Revenue is likely to degrow 5.6% YoY, owing to lower phenolacetone realizations in Q2FY26E. We expect revenue to inch up marginally by 2.4% QoQ, on volume growth in the advanced intermediate (AI) business, offsetting the realization decline in the phenolic segment. We expect a slight improvement in gross margin in Q2, as phenol-acetone spreads improve due to better input cost, while the backward integration efforts from recent commissioning of project should aid the AI business margins. Operating leverage could aid absolute EBITDA of 9% QoQ. AI business revenue is expected to degrow 5% QoQ. We believe margins for the AI business will improve to 6.5% in Q2FY26E due to better operating leverage.

Navin Fluorine International (NFIL IN):

NFIL’s high-performance products (HPP) vertical will log a better quarter, with 43% YoY growth, mainly from higher ref gas realizations, volume ramp-up of the new 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 Rs2.1bn (up +33% YoY, -4% QoQ) and -19% YoY degrowth for the CDMO business. Improvement in the business mix, aided by operating leverage, could lead to a ~27% margin in Q2FY26E.

Atul (ATLP IN):

We expect Atul to post a sequentially flat quarter (+8.9% YoY), given weaker domestic demand and teething issues in the caustic soda plant. Liquid epoxy resin (LER) expanded capacity in the ramp-up stage. Exports were better for Atul in the quarter due to restocking for key molecules post pre-buying witnessed in Q4FY25. We expect growth in the life science chemicals (LSC) business at 20% YoY (led by better 2,4-D exports) and for performance and other chemicals (POC) business at 5% YoY (fall in caustic soda realizations and teething issues offset by LER ramp-up). We build in an EBITDA margin of 16% in Q2 (- 140bps YoY/flat QoQ), considering the lower contribution from the caustic soda plant. We budget 18% EBIT margin for the LSC business (-250bps YoY/+280bps QoQ) and 9% EBIT margin for the POC business. Adjusted PAT is expected at Rs1.3bn (-4.3% YoY/+2.5% QoQ).

Aarti Industries (ARTO IN):

We expect Aarti to report an EBITDA of Rs2.4bn vs Rs2.0bn YoY, on better operating leverage, led by revenues recorded on bulk consignments (MMA) shipped in Jul and Aug, which had been delayed since Q1. We expect the revenue to grow 25% YoY on a lower base of Q2FY25. The company is facing lower realization in its energy business (led by MMA), compared to Q2FY25, while the core portfolio is showing a gradual recovery from the agrochemical cycle. Geopolitical events have kept the MMA business volatile in the quarter. Aarti’s discretionary portfolio continues to perform better than the nondiscretionary one in the domestic market. Export performance (excluding MMA) showed some signs of recovery in Q2FY26. In our view, Aarti’s Q2FY26E EBITDA margin should decline a bit, given a higher mix of MMA in absolute EBITDA with lower gross margins.

Epigral (EPIGRAL):

Epigral’s chlor-alkali business contribution would remain largely flat in Q2FY26E, on lower caustic soda ECUs, offset by volume growth (ECUs of caustic soda are in the range of Rs31-32/kg). We expect revenue of Rs2.8bn for this business (+10% YoY/-6.9% QoQ). The derivatives and specialty chemicals businesses are likely to report ~21% decline in revenue YoY due to a slower ramp-up of CPVC volumes (due to off-season) as well as fall in realizations, which were partially offset by better ECH realizations. We have built Rs2.9bn revenue for this segment. We expect EBITDA margin to correct to ~23.5% (-500bps YoY/ - 340bps QoQ), led by stable RM prices impacting overall gross margins. Epigral will see the benefit of a lower tax rate of ~25% in Q2FY26E vs 34-35% in FY25, as MAT credit is completely utilized.

Anupam Rasayan India (ANURAS IN):

We expect Anupam to report a revenue of Rs4.6bn with growth of 140% YoY, amid recovery in exports and liquidation of old inventory in the domestic market in Q2FY26E. We expect the order book execution to start picking up. We expect a moderate increase in contribution from LoI-based revenue in Q2FY26E. We expect margins to fall as the old inventory is sold at lower margins. We bake in 22.3% EBITDA margins as against the 26-28% guidance. We believe that the higher number of working capital days will start tapering off in H2FY26E as inventory gets cleared and revenues come in higher. PAT for the company should be ~Rs350mn, based on our estimates.

GHCL (GHCL IN):

GHCL’s consolidated revenue is expected to see a marginal decline of 3.4% QoQ/3% YoY because of lower realizations in Q2FY26E (due to cheaper imports despite the minimum import price or MIP restriction). We expect soda ash prices to be stable in the coming quarter and gradually improve, led by imposition of ADD on soda ash. We believe lower soda ash prices in Q2 had little impact on the EBITDA margin, as they were offset by cost optimization. Absolute PAT is expected to be flat at ~Rs1.4bn (-4% QoQ/ -10% YoY) due to the higher tax rate.

Vishnu Chemicals (VCL IN):

We expect Vishnu’s consolidated revenue to grow marginally by 2.7% QoQ/3.6% YoY, considering muted export demand due to the US’ tariff situation; domestic demand, though, remained robust in Q2. We believe that the company was not able to achieve better pricing for its short-term contracts. We expect stable export volumes in the chromium business compared to better export volumes in barium chemicals. The marginal realization decline in the chromium business will be offset by volume ramp-up in the barium chemical business. We expect EBITDA of Rs571mn, with ~16% EBITDA margin. PAT could be ~Rs320mn, similar to that of Q1.

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