Chemical shares in focus; Aarti Industries, Vinati Organics surge over 9%

Analysts at Dolat Capital have kept their FY20E estimates for the sector largely unchanged as they estimate limited impact of Covid-19 on the sector

Shares of chemicals companies, mainly specialty and commodity, were in focus in an otherwise range-bound market on Tuesday on hopes of strong earnings for March quarter (Q4FY20) as brokerages expect the disruptions caused by Covid-19 to have been limited to the last few days of the quarter. After securing the supply chain, logistics and mandatory compliance requirements, the chemicals companies have resumed operations at their manufacturing units since the first half of April.

Aarti Industries, Vinati Organics, Transpek Industries, Bodal Chemicals, Nocil, Fairchem Speciality and National Peroxide gained over 9 per cent in intra-day deals on the BSE today. In comparison, the S&P BSE Sensex was up 0.37 per cent at 31,859 points at 11:48 am.

Analysts at Dolat Capital have kept their FY20E estimates largely unchanged, as the brokerage firm believes that business operations of chemicals sector have not been impacted for a large part of January-March quarter and that the factory shut downs have impacted the business only in the last 7 days of March 2020.

“The chemical companies that earn 50 per cent or more of their revenues from exports should continue to benefit from the depreciating rupee (average quarterly rupee has depreciated 2.7 per cent YoY and 1.6 per cent QoQ in Q4FY20),” the brokerage firm said in sector update.

Among individual stocks, Aarti Industries hit an all-time high of Rs 1,115, up 9 per cent today on the BSE. In the past four days, the stock has rallied 22 per cent after the company said it units are currently operating at about 50-80 per cent capacity utilization. The company believes India continues to emerge as a global sourcing destination with strong demand from customers both in India and globally.

Brokerage firm Angel Broking said that Aarti Industries is well-diversified across product, customer, geography and end user industry. Significant opportunity for Aarti will arise from environmental related issues in China and companies looking to diversify supply chains.

Shares of Nocil jumped 18 per cent intra-day to Rs 98.55 on the BSE on the back of heavy volumes. Currently, the stock was trading 11 per cent higher at Rs 92.75 with four-fold jump in trading volumes. A combined 12.5 million equity shares, representing 7.5 per cent of the company's total equity, have changed hands on the NSE and BSE so far.