Chemical shares rally; Neogen, Fairchem, Navin Fluorine surge over 10%

Shares of commodities and specialty chemicals companies were on a roll on Wednesday with Navin Fluorine International (NFIL), Fairchem Speciality and Neogen Chemicals rallying more than 10 per cent on the BSE in an otherwise weak market on expectation of strong earnings growth going forward.

Shares of NFIL hit a new high of Rs 1,426, up 12 per cent and zooming 34 per cent in the past two trading days. On Tuesday, the company entered into a deal worth Rs 2,900 crore - its largest ever - with a global company to manufacture and supply a high-performance product (HPP) in the fluorochemicals space.

Post commencement, it will be a complete new business segment for NFIL. Revenue from the deal is expected to be evenly spread over seven years.

The big order win boosts NFIL’s long-term revenue visibility and raises confidence in its capability to win large orders in the future as well, analysts at Emkay Global Financial Services said in a company update. The brokerage firm maintains ‘buy’ rating on the stock with the target price of Rs 1,600 per share and remains overweight on the sector.

With today's rally, the stock has zoomed 106 per cent from its October 7, 2019 level of Rs 693, against a 7 per cent rise in the S&P BSE Sensex.

Neogen Chemicals, too, hit an all-time high of Rs 548, surging 19 per cent in today's session. In the past one month, the stock has soared 43 per cent after the company during October-December quarter (Q3FY20), recorded 30 per cent revenue growth and 91 per cent expansion in profit after tax (PAT), driven by better demand scenario as well as higher production. Earnings before interest, tax, depreciation, and amortisation (Ebitda) margin improved to 19.4 per cent from 16.5 per cent in Q3FY19.

The management said the company remains on track to deliver accelerated performance in the years to come backed by revenues from the newly constructed Inorganic facility at Dahej SEZ as well as debottlenecking initiatives at the existing plants. The performance will be further bolstered by upcoming organic expansion which will come in towards the end of next financial year.

Meanwhile, analysts at JM Financial Institutional Securities are optimistic that margins in calendar year 2020 (CY20) will be better for the Indian organic chemical industry.

“We believe that CY20 should support relatively stronger margins. The reduction in China-US trade war related tensions is likely to improve global growth. However, there is a concern that if Coronavirus continues to spread, it could impact global growth. However, Coronavirus would also likely impact Chinese chemical production, specifically in Hubei region,” the brokerage firm said in a sector report.

Over the past one month, shares of NFIL, Fairchem Speciality, Neogen Chemicals, Deepak Nitrite, Alkyl Amines and India Glycols have gained in the range of 24 per cent to 50 per cent, against a 3 per cent decline in the S&P BSE Sensex.

FAIRCHEM SPECI. 705.00 471.30 49.6
NAVIN FLUO.INTL. 1573.60 1084.65 45.1
NEOGEN CHEMICALS 527.60 379.85 38.9
ALKYL AMINES 1749.50 1291.70 35.4
DEEPAK NITRITE 513.00 399.05 28.6
BHAGERIA INDUST. 145.00 116.45 24.5
INDIA GLYCOLS 365.70 296.20 23.5
SH.PUSHKAR CHEM. 132.20 107.85 22.6


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