Top Chemical Stocks in India for 2024

India’s chemical sector has faced significant challenges in recent years, plagued by rising input prices, poor demand, limited pricing power, and destocking in international markets. Stocks in the sector have underperformed the broader Nifty 50 Index since FY23. However, improving demand conditions, rising exports, and softer input prices suggest better times ahead for chemical companies. Despite these positive indicators, not all segments are performing equally well, and valuations have surged, requiring investors to be selective in their investments.

Sector Overview and Current Market Dynamics

The primary issue for India’s chemical sector has been declining demand, especially in Europe, where the economic environment has been weak. Cheap exports from China and rising exports from Europe, due to weak domestic demand, have led to oversupply in the sector. This has resulted in sharp destocking, slower purchases, and declining pricing power. However, Q4 FY24 saw signs of improvement. Despite lower chemical prices, Indian companies recorded the highest-ever exports of chemicals (excluding petrochemicals). This strong export momentum has continued into FY25. Additionally, lower crude prices in FY25 are expected to reduce input costs, boosting margins in the chemicals sector.

Segment-Specific Recovery

The improvement in demand has been more pronounced in certain areas. Commodity chemicals are best positioned in the recovery cycle, followed by specialty chemicals, while agrochemicals are expected to recover more slowly.

Top 5 Chemical Stocks to Watch

The following are the best chemical stocks in India shortlisted based on their impressive cash flow growth, NPM, OPM, returns over the past year and month, sales growth over three years, and profit growth over three years.

1. Premier Explosives Limited, with a market cap of Rs 4,257.89 crore, has shown a staggering 824.82% return over the past year and a 55.11% return over the past month. The company’s sales growth over three years stands at 21.00%, while profit growth is an impressive 166.08%. The firm has also achieved a 302.86% growth in cash flow, with a YoY NPM growth of 689 basis points and OPM growth of 854 basis points. Premier Explosives engages in manufacturing industrial explosives and detonators and provides operation and maintenance services for solid propellant plants.
2. Himadri Speciality Chemical, with a market cap of Rs 19,775.28 crore, has delivered a 202.00% return over the past year and a 15.71% return over the past month. The company’s sales growth over three years is 35.57%, and profit growth is 105.55%. Himadri has seen a 650.11% growth in cash flow, with a YoY NPM growth of 409 basis points and OPM growth of 584 basis points. The company is primarily engaged in manufacturing carbon materials and chemicals, being the top coal pitch manufacturer in India and the only company to manufacture advanced carbon materials in the country.
3. Amines & Plasticisers, with a market cap of Rs 1,396.11 crore, has posted a 180.98% return over the past year and a 30.88% return over the past month. The company’s sales growth over three years is 13.55%, while profit growth is 6.92%. It has achieved a 934.22% growth in cash flow, with a YoY NPM growth of 233 basis points and OPM growth of 357 basis points. Amines & Plasticisers produce alkyl alkanolamines, morpholine, and gas-treating solvents, catering to various industries including oil refineries, natural gas plants, and pharmaceuticals.
4. Hindcon Chemicals, with a market cap of Rs 269.32 crore, has shown a 179.74% return over the past year and a 0.90% return over the past month. The company’s sales growth over three years is 13.37%, while profit growth is 9.32%. Hindcon has seen a 70.95% growth in cash flow, with a YoY NPM growth of 457 basis points and OPM growth of 497 basis points. The company manufactures and sells sodium silicate and construction chemicals, and is also involved in trading activities.
5. Keltech Energies, with a market cap of Rs 406.80 crore, has delivered a 158.14% return over the past year and a 5.60% return over the past month. The company’s sales growth over three years is 26.84%, while profit growth is 68.46%. Keltech has achieved a 179.78% growth in cash flow, with a YoY NPM growth of 218 basis points and OPM growth of 261 basis points. The company manufactures explosives and perlite-related products.

Conclusion

The Indian chemical sector is poised for recovery, with improving demand conditions, rising exports, and softer input prices indicating better times ahead. However, investors need to remain cautious and selective, focusing on stocks with strong fundamentals and favourable growth metrics. Premier Explosives, Himadri Speciality Chemical, Amines & Plasticisers, Hindcon Chemicals, and Keltech Energies have demonstrated impressive performance across various financial metrics, making them top picks in the sector. As the demand scenario remains dynamic, keeping a close watch on market developments will be crucial in capturing superior returns on investment.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. The information is based on various secondary sources on the internet and is subject to change. Please consult with a financial expert before making investment decisions.