Specialty chemicals - Price trend in Aug-20 - ICICI Securities

Chemical industry has seen recovery with easing of lockdown and improvement in demand driving sequential improvement in volumes, though volumes are still down on YoY basis. We expect SRF to continue to benefit with elevated spreads in packaging films - BOPET / BOPP. BOPET spreads have been mostly stable despite factories normalising manufacturing capacity; BOPP has seen some dip. Technical textiles' profitability may improve sequentially on improving spreads and likely better volumes. R-22 prices have declined on seasonality and volumes in eight months dipped only 16.5%, vs 25% cut in the second phase-down, which may hurt volumes in the next four months. Galaxy Surfactants has seen lauryl alcohol prices dip QoQ, which may hurt margins. Pigment export volumes are down only 5.4% YoY in two months, which is good for Sudarshan Chemical. (Note: All prices stated are in Rs/kg; Q2FY21 includes data for Jul'20 and Aug20)

SRF Ltd: Strong BOPET spread continues in Q2FY21 too

- R-22 prices dipped 5.7% QoQ and 0.3% YoY to Rs189 in Q2FY21 and export volumes were down 32% to 3,550te in the first two months of the quarter. Phase-down 2 was expected to hurt volumes by 25% but, in eight months, R-22 export volumes are down only 16.5%. Thus, it remains to be seen if volume decline accelerates in the remaining four months of the year. Fluorspar (acid spar) prices are down 3.2% QoQ / 8.1% YoY to Rs30. R-22 spread (to fluorspar and chloroform) was Rs118 vs Rs123 in Q1FY21.

- MDC (methylene chloride) prices shrunk 0.5% QoQ / 13.7% YoY to Rs35. It was also due to fall in chorine and methanol prices. We note MDC spreads should have improved QoQ.

- NTCF prices dipped 1.8% QoQ / 3.3% YoY to Rs193. Caprolactam prices were down 17.8% QoQ and 28.2% YoY to Rs81. NTCF-caprolactam spread rose to Rs112 vs Rs98 in Q1FY21. We expect improvement in SRF's technical textiles' profitability in Q2FY21 on likely better volumes and improved spreads.

- BOPET prices were down 4.4% QoQ / 1.6% YoY at Rs119. PTA and MEG prices dipped 14.3% QoQ / 39.3% YoY to Rs32 and were down 6.3% QoQ / 23.1% YoY to Rs28, respectively, probably due to subdued crude oil prices. BOPET-PTA/MEG spread fell 0.2% QoQ while it was up 30.4% YoY to Rs82 (vs Rs82 in Q1FY21). The continuation of strong BOPET spread means SRF's packaging film segment's EBIT margins are likely to remain elevated even in Q2FY21. Further, export volumes dipped only 4.7% to 20kte in the first two months of Q2FY21.

- BOPP prices rose 0.9% QoQ and 0.7% YoY to Rs126 while polypropylene prices rose 11.8% QoQ / fell 14.0% YoY to Rs65. BOPP-PP price spread was at Rs61, up 22.6% YoY, but it was down 8.5% QoQ.

Sudarshan Chemical (SCIL): Organic pigment prices dip 2.3% QoQ

- Organic pigment prices were down 2.3% QoQ and up 2.5% YoY to Rs492 vs Rs503 in Q1FY21. Organic pigments are inclusive of all colours including CPC. Their export volumes dipped 5.4% YoY to 17.7kte in two months of Q2FY21

- Azo pigment mixture prices fell 7.3% QoQ and 14.8% YoY to Rs425 vs Rs458 in Q1FY21.

- Inorganic pigment prices dipped 2.3% QoQ and 12.9% YoY to Rs87 vs Rs89 in Q1FY21.

Galaxy Surfactants (GSL): Lauryl alcohol prices remain high

- Lauryl alcohol prices were at Rs92, down 5.5% QoQ but up 11.1% YoY, vs Rs97 in Q1FY21. This means gross margin can dip for Galaxy Surfactants in Q2FY21.

Vinati Organics

- Ibuprofen prices dipped 27.4% QoQ and rose 28.4% YoY to Rs2,482 (vs Rs3,420 in Q1FY21).

- IBB prices rose 2.9% QoQ and 1.2% YoY to Rs136 vs Rs132 in Q1FY21.

Atul Ltd

- 2,4-D prices rose 5.5% QoQ, but fell 13.1% YoY to Rs156 (vs Rs148 in Q1FY21). Export volumes were mostly flat at 2,974te in the first two months of Q2FY21.

- Para cresol prices were down 6.8% QoQ and 9.9% YoY at Rs177. Export volumes fell 19.5% YoY to 1,670te for two months in Q2FY21.

- Epoxy prices dipped 3.2% QoQ and 7.1% YoY to Rs164. Export volumes dropped 20% YoY to 3,055te in first two months of Q2FY21.

- Resorcinol prices rose 7.1% QoQ and 2.5% YoY to Rs710. Export volumes were up 57% YoY to 518te.

Gujarat Fluorochemicals

- PTFE prices dipped 2.3% QoQ, but rose 1.5% YoY to Rs676 (vs Rs692 in Q1FY21). PTFE (to fluorspar) spread shrunk 2.2% QoQ, but increased 2.9% YoY to Rs597 (vs Rs611 in Q1FY21). Export volumes were down 12% YoY to 1,591te in first two months of Q2FY21.

Source : Equity Bulls

Keywords