 "PL Capital bets on these 3 chemical stks despite sector headwinds; details")
PL Capital on chemical sector: Brokerage firm PL Capital has turned selectively bullish on the Indian specialty chemicals space, identifying Fine Organic, PCBL, and Vinati Organics as its top picks, even as the sector grapples with global oversupply, weak ecosystems, and aggressive price competition from China in new-age battery chemicals.
The brokerage cautioned that while India has announced ambitious plans for 200GWh of battery manufacturing capacity, execution risks remain high. The lack of a strong domestic ecosystem, limited focus on research and development (R&D), and the near-monopoly of Chinese suppliers pose structural challenges for Indian companies venturing into battery chemicals such as PVDF binders and lithium salts.
The situation is exacerbated by global overcapacity – China alone already has 2.8TWh of installed Li-ion cell capacity against global demand of 1.5TWh in 2024. With EV sales slowing, capacity utilisation slipped to just 42 per cent, driving battery pack prices down nearly 20 per cent Y-o-Y to USD115/kWh and sparking a wave of bankruptcies in the EV sector. ALSO READ | Amber Enterprises stock up 62% in one year; PL Capital sees more 35% upside
Considering these headwinds, PL Capital prefers specialty chemical companies with proven business models, visibility on growth, and strong balance sheets.
- Fine Organic Industries: The brokerage remains constructive on Fine Organic, backed by its capacity expansion plans in both India and the US by FY27. It expects continued growth in food additives and specialty oleochemicals, assigning a target price (TP) of ₹5,610, valuing the stock at 28x FY27E EPS.
- PCBL: PL Capital highlighted the company’s volume growth in its carbon black business and a recovery in Aquapharm, its specialty chemicals subsidiary. It sees operating leverage playing out, supporting margins, and has assigned, PCBL stock a TP of ₹474 (22x FY27E EPS).
- Vinati Organics: Strong demand for ATBS, a key monomer used in water treatment and enhanced oil recovery, along with scaling up of its antioxidants portfolio, positions Vinati Organics well for growth, according to PL Capital. The brokerage values the stock at 33x FY27E EPS, with a TP of ₹2,091.
While the brokerage remains cautious on India’s foray into battery chemicals given profitability risks from oversupply and Chinese price aggression, it believes that specialty chemical leaders like Fine Organic, PCBL, and Vinati Organics offer sustainable growth opportunities and attractive risk-reward in the medium-term.