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JM Financial recommends purchasing one large- and one mid-cap chemical stock.

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According to a note on the Indian chemicals market from brokerage and research firm JM Financial, contractual companies offer strong volume off-take visibility notwithstanding Europe’s slowing demand and high energy prices. Additionally, if any offtake slowdown can be rectified in upcoming quarters As a result, the brokerage firm has chosen to contract SRF for largecap stocks and Navin for midcap stocks.

With the exception of contractual players, the brokerage anticipates that most chemical businesses it covers will experience modest sequential sales growth (or even contraction in some cases), while contracted players like Navin Fluorine and Anupam Rasayan will likely post good sequential sales.

Additionally, a decline in basic chemicals players should lead to an improvement in sequential margins for the majority of the companies we cover. In addition, it stated that the restoration of the export incentives scheme should increase margin for all chemical companies starting in the 4QFY23.

“SRF’s sales of refrigerant gases are probably going to decline sequentially, but sales of fluoro speciality chemicals should keep growing strongly, in our opinion. According to the paper, Navin Fluorine will profit from a significant uptick in HPP and speciality chemical contracts.

Due to seasonality, which will counteract CSM’s business difficulties, PI’s domestic company will perform well. Price increases will assist Clean Science when the production of newer items picks up. Contract players are still preferred by the brokerage because they guarantee significant volume growth and margin pass-through (with a certain lag in some cases). SRF, a largecap firm, and Navin Fluorine, a midcap stock, are its top chemical sector investment picks.

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