2 Chemical Stocks To buy & Hold This September, Prabhudas Lilladher Suggests

Nifty and Sensex are running red today, on weak global cues, after the publication of US inflation data yesterday. Here Prabhudas Lilladher suggests two chemical stocks to buy and hold this month. The brokerage firm initiated coverage on Jubilant Ingrevia Ltd (JUBLINGR) and Laxmi Organic Industries Ltd (LXCHEM), pivoting around acetyls and radically shifting to specialty. These companies have large common business interests, both generate more than 50% revenue from acetyls and fuel-grade ethanol and both plan to scale their presence in specialty chemicals, check details here.

Jubilant Ingrevia Ltd. - stock performances

The current market price of the company is Rs. 491.15/ share, and Prabhudas Lilladher has estimated a target price for the stock at Rs. 860/share, and given buy rating. In the last 6 months it has given 7.28% returns, however in the last 5 years it has given 82.79% returns. Its 52-week high market price is Rs. 838.75, and 52-week low market price is Rs. 401.20.

Stock advantages

Jubilant's global market leadership in various products across acetyls and pyridine derivatives, enables it to move up the value chain in CDMO, diketene derivatives, agro actives and advanced intermediates, pharma, cosmetic-grade vitamins, vitamin premixes etc. We expect revenue/ EBITDA CAGR of 26%/27% in SPCM and 11%/11% in NHS, aided by capex outlay of Rs. 15 bn over FY22-25E, the brokerage firm stated.

Laxmi Organic Industries Ltd. - stock performances

The current market price of the company is Rs. 383.30/ share, and Prabhudas Lilladher has estimated a target price for the stock at Rs. 335/share, and given hold rating. In the last 1 month it has given 18.21% returns, however in the last 5 years it has given 105.41% returns, making it a multibagger stock. Its 52-week high market price is Rs. 628, and 52-week low market price is Rs. 274.20.

Stock advantages

"Laxmi Organic is also diversifying into Fluorochemicals through asset acquisition of Miteni, Italy (relocating to India; to be commissioned in H2FY23) and capitalising on its R&D and portfolio capabilities. Laxmi's thrust to rejig SI product basket by ramping up newer products (higher margin) and rising share of high value products like Esters (end use in pharma), augur well for operating margins. We expect SI EBITDA to grow at ~22% CAGR topped with FI earnings commencing in FY23," the brokerage firm said.

Stocks to buy - Prabhudas Lilladher suggests

"We believe that strong underlying global demand environment in agrochemicals and pharmaceuticals along with China+1 tailwinds and improved prospects of CDMO (long term contracts from leading global innovators; sticky business) will drive Jubilant and Laxmi Organic's high value business, EBITDA CAGR of 22% and 30% over FY22-FY25E with an increase in FY25E EBITDA contribution to 67%/70% (53%/55% in FY22). Increased focus on structural growth areas and commensurate investments augur well for both Jubilant and Laxmi Organic, as balance sheets remain healthy despite large capex outflows over FY22-25E," the brokerage firm said.

"While we like both companies' stronghold in respective businesses and growth efforts, we believe Jubilant is a re-rating candidate, while most positives are factored in Laxmi's valuations," Prabhudas Lilladher added.

Company profile - Jubilant Ingrevia

Jubilant Ingrevia Ltd. is a leading global player of acetic anhydride, pyridine & its derivatives along with other products across three business segments - Specialty Chemicals (SPCM), Nutrition & Health Solutions (NHS) and Chemical Intermediates (CI). With an expertise in 35 technology platforms, the company is steadily expanding its product portfolio by leveraging business synergies.

Company profile - Laxmi Organic

Laxmi Organic, a leading Acetyl Intermediates (AI) player is leveraging its core chemistry to scale up Specialty Intermediates (SI) portfolio (ketene/ diketene derivatives), while its fluorochemicals (FI) plant is facing time and cost overruns and will gradually scale up once commissioned in H2FY23, in our view.

Return comparison from stocks - NSE

In this table the Current Market Price (CMP) and the Target Price (TP) of the recommended stocks have been mentioned.

Company	CMP	Target Price
Jubilant Ingrevia	Rs. 491.15	Rs. 860
Laxmi Organic	Rs. 383.30	Rs. 335

Disclaimer

The above stocks were picked from the brokerage report of Prabhudas Lilladher. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.