Chemical stock to buy now for an upside potential of more than 55%; Do own it?

As per the sources, the specialty chemicals sector in India is projected to reach $40 billion by 2026, growing at a CAGR of 9-12%. Currently valued at $32 billion, it constitutes 22% of India’s total chemicals market, with over 50% of chemical exports coming from this segment. The sector is vital for industries like pharmaceuticals, textiles, and agrochemicals.

Price movement

With a market capitalization of Rs 26,245.43 crore, the shares of Deepak Nitrite Ltd were trading at Rs 1924.25 per share, increasing around 1.38 percent as compared to the previous closing price of Rs 1,898.00 apiece.

Brokerage Target

Morgan Stanley, one of the well-known brokerages globally, gave a ‘Buy’ call on the fertilizer stock with a target price of Rs 3,000 apiece, indicating a potential upside of 58 percent from Wednesday’s price of Rs 1,898 per share.

Brokerage Rational

As per the brokerage, the phenolics business witnessed a production outage of 12-15 Kt, which impacted the company’s costs. The plant operations have stabilized this quarter, and the impact of higher imports is expected to normalize in March.

The brokerage noted that advanced intermediates are expected to recover significantly in Q4FY25 and sustain into FY26, with traction from both domestic and international customers, along with new products. It highlighted that cost initiatives’ benefits will fully materialize in Q4, while upcoming projects face delays, with start-ups expected from FY26.

Also read: Smart meter stock to buy now for an upside potential of more than 50%; Do you own it?

Strategic Initiatives

Deepak Nitrite is entering the Advanced Materials sector with a Rs 5,000 crore investment in polycarbonate resin manufacturing. The project includes greenfield infrastructure, funded via debt and equity. A Technology Licensing Agreement with Trinseo PLC enables a 165,000 MT annual capacity, including proprietary equipment from Stade, Germany.

Market insight

India’s polycarbonate resin demand was ~240,000 MTPA in 2023 and is expected to outpace GDP growth. Currently met entirely by imports, this presents a major opportunity for domestic production. Key sectors include mobility, electronics, medical equipment, and packaging, with new EV battery box applications emerging.

Project Updates

The nitric acid project, along with photochlorination, hydrogenation, and nitration block projects, is set for commissioning in H2 FY25. Additionally, the R&D center near Vadodara, enhancing advanced chemistry capabilities, is also on track for commissioning in H2 FY25.

Future Outlook

Management expects demand to rise in H2 FY25 as China’s destocking ends, driven by legacy European customers. The strategy focuses on diversifying customers and expanding distribution to mitigate risks. Agrochemical demand recovery is anticipated from Q3, supporting a positive outlook for CY25.

Company profile

Deepak Nitrite Limited, an India-based chemical manufacturer, operates in two segments: Advanced Intermediates (sodium nitrite, fuel additives, agrochemicals) and Phenolics (cumene, phenol, acetone). Its products cater to diverse industries including colorants, rubber chemicals, pharmaceuticals, textiles, paints, auto, and more.

Written by Abhishek Singh

Disclaimer

The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Dailyraven Technologies or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.

The post Chemical stock to buy now for an upside potential of more than 55%; Do own it? appeared first on Trade Brains.