The year 2019 remained turbulent throughout for the stock market, testing the returns on selective few bluechips from all sectors. Apart from the main sectors, there are niche industries that have also delivered the best returns so far. The chemical space is the one industry that will regain its momentum despite moments of stagnancy.
This year, stocks like Vinati Organics, Navin Fluorine, Deepak Nitrite, Granules India and few others continued their rise despite the global slowdown. The big reason behind the surge in the chemical stocks is its utility, which will never end as it is used by all the sectors.
In terms of returns this year, Vinati Organics rose 18 percent to the current market price. Other midcaps and smallcaps like Navin Fluorine, Deepak Nitrite and Granules India surged 39 percent, 64 percent and 50 percent respectively. In fact, most of them from this space have reported stable returns this year.
If we were to take returns delivered by the aforementioned stocks in the last 10 years, Vinati Organics rallied the most. The stock has given 3,200 percent returns, Granules India jumped 1,322 percent while Navin Fluorine climbed 1,355 percent. Deepak Nitrite rose 1,268 percent since January 25, 2013.
In terms of sector earnings as of September 2019, the net sales surged 29 percent YoY to Rs 31,164 crore this year. Meanwhile, the net profits saw a stark rise of 345 percent YoY to Rs 8,395 crore.
In the case of valuations, the sector’s return on equity (RoE) is currently at 14.74 percent as compared to 13.52 percent last year. EBITDA margin rose to 18.62 percent from 17.48 percent in 2018. Total debt/equity has come down to 0.3 from 0.46 last year.
B&K Securities in its recent report on the sector said, “We expect the pockets of outperformance to continue with companies having diversified exposure delivering healthy performance. The medium-term growth story for the sector remains intact with the bulk of the capacity expansion getting commercialized by the end of FY20 or early FY21. We remain positive on the sector.”
Firstcall Research, in its recent report, said, “The sector is on the verge of rapid growth in the coming years due to increasing population and employment opportunities. The market size of the domestic agrochemical sector is expected to reach $8.1 billion by FY25. The specialty sector is expected to increase by about 10 percent annually to almost double the size by FY25.”
First Published: IST