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Planned CapEx of INR 16,100+ crores from Indian Specialty Chemicals over the next 3 years: Windmill CapitalThe sector is expected to grow 19% in FY24 and 17.6% in FY25 BANGALORE, India, March 23, 2023 /PRNewswire/ -- In a recent study on Specialty Chemicals by Windmill Capital, a wholly- owned subsidiary of smallcase, it is expected that Indian Specialty Chemicals companies have CapEx plans in excess of Rs. 16,100 crores over the next 3 years. Asian Paints, Tatva Chintan Pharma, and PI Industries are some companies within the Specialty Chemical sector witnessing margin pressure on the bottom line. The segment is expected to grow 19% in FY24 and 17.6% in FY25. The Specialty Chemicals smallcase has delivered 13.8% compounded returns since inception in July 2016 vs 12.9% compounded returns delivered by Equity Mid and Smallcap stocks during the same period. Naveen KR, smallcase manager and Senior Director, Windmill Capital, said, "Growth in the Specialty Chemical segment is driven by strong domestic demand and increased demand from overseas markets, which has been reinforced by major global economies adopting the China +1 policy. Many companies are seeing high growth, but due to margin pressure results have been poor and as a consequence stocks are taking a beating. Asian Paints, PI Industries, Aarti Industries, Gujarat Fluorochemicals, Vinati Organics, Anupam Rasayan, Clean Science and Technology, have highlighted strong CapEx plans in this sector as they see demand for the products that they offer." CapEx plans of Rs. 16,100+ crores over the next 3 years from different Indian Specialty Chemicals Companies. Some of them include:
Margin pressures weighing on the bottom line – Asian Pants| Tatva Chintan Pharma| PI Industries Ltd The pandemic and subsequent macro challenges like high inflation and supply chain disruptions have had varying impacts on different segments of the Specialty Chemicals sector in the country. While domestic-oriented segments like construction chemicals, which includes Asian Paints, have seen a recovery in demand, their margins have been impacted due to a spike in raw material prices. Entities like Tatva Chintan Pharma, which have significant external exposure and cater to end-user industries like automobiles and textiles, have been significantly impacted due to lower sales and margin pressure. Companies like PI Industries, that deal in agrochemicals, API, etc, have not been impacted and continue to see positive top-line and bottom-line growth. While challenges will continue to persist in the near term, long-term prospects for the Specialty chemical industry in India continue to be bright. Comparative Price Performance of Refinitiv India Specialty Chemicals Index against Nifty During the past year the Refinitiv India Specialty Chemicals index, an index constructed by data provider Refinitv Eikon and that track the Indian Specialty Chemicals sector, has dropped by 14.3% compared to the flattish performance of the Nifty 100 and Nifty 500. However, on a 3-year and 5-year basis, the Specialty Chemicals Index has given handsome returns and comfortably beaten the performance of large-cap and multi-cap indices. To understand what is ailing the Specialty Chemicals index the Refinitiv India Specialty Chemicals Index was studied. Median expected growth rate and expected EBITDA margin of Specialty Chemical companies that Windmill Capital tracks Windmill Capital highlights that Specialty Chemicals sector's expected revenue growth stood at 18.4% in FY23. It is expected to grow 19% in FY24 and 17.6% in FY25. EBITDA Margin for FY23 is expected to decline due to high inflation of 17.5%. As inflation eases, EBITDA margins are expected to improve to 21.5% in FY24 and are expected to remain steady at 21.3% in FY25. Estimated EPS growth for FY23 stood at 19.3%, which is expected to improve to 30.7% in FY24 and grow by 22.9% in FY25. Expectations on the earnings of Specialty Chemicals in Q4 2023 & FY23 Brighter days seem to be ahead for Specialty Chemical companies. Due to normal monsoon and high prices at mandi's, green shoots of rural demand have been appearing. Sequential cooling of inflation has eased pressure on consumer wallets, aiding volume recovery for end user industries as well as softening impact of input cost for specialty chemical companies. China opening up and improvement in aspects of the global supply chain are other positives. Revenue of Specialty Chemical companies is expected to grow by 19%/17.6% in FY24 / FY25. Significant margin improvements are also forecasted and EBITDA margin is expected to improve to 21.5% / 21.3% in FY24/FY25.
About smallcase: smallcase is a financial technology company building a platform for direct indexing, model portfolios of stocks & ETFs known as smallcases. In the last six years, smallcase has developed an ecosystem of 350+ businesses in the capital markets space. The ecosystem includes some of India's prominent financial institutions and brands that leverage the smallcases platform & technology. Over 6.5 million investors use smallcase products and apps every month. Headquartered in Bengaluru, smallcase has more than 300 employees across engineering, product, business, and growth functions. Download the smallcase app here: https://smallcase.onelink.me/62WC/pr About Windmill Capital: Windmill Capital Private Limited (hereinafter referred to as "the Company") is a SEBI registered Research Analyst having registration number - INH200007645 under SEBI (Research Analyst) Regulations, 2014 and is a wholly owned subsidiary of smallcase Technologies Private Limited. Visit https://windmillcapital.smallcase.com for more information. Disclaimer: This is not investment advice or buy or sell recommendation. Readers should do their own research and analysis or consult an investment adviser before taking positions in any stocks or sectors or making any financial allocations. Equity markets can cause complete loss of capital. Please read full disclaimers at https://windmillcapital.smallcase.com/#disclosures Logo: https://mma.prnewswire.com/media/2038964/Windmill_Capital_Logo.jpg View original content to download multimedia:https://www.prnewswire.com/in/news-releases/planned-capex-of-inr-16-100-crores-from-indian-specialty-chemicals-over-the-next-3-years-windmill-capital-301779621.html |