3 Stocks From Specialty Chemicals Sector Likely To Surge, Buy For High Returns: Motilal Oswal

Motilal Oswal has a buy on three stocks from the Specialty Chemicals sector. These three stocks include Galaxy Surfactants, NOCIL, and Vinati Organics. The brokerage in its December 2022 Result Preview report has listed these three with attractive valuations. According to the brokerage, Brent crude prices averaged USD88.5/bbl in 3QFY23, down 12% QoQ due to the uncertainties over Chinese demand and Russian supply that have disrupted the global oil market in CY22. However, prices were up 11% YoY. Here we list these three stocks with key highlights:

1. Galaxy Surfactants Ltd. (GALSURF)

The brokerage has assigned Rs 3,504/share target price with a "Buy" on the stock of Galaxy Surfactants. With the given target price the stock purchased at the current market price, it would give up to 49% return. This is a midcap Indian chemical company with a market capitalisation of Rs 8,378.31 crore. 

The stock last traded at Rs 2,363.10/share on NSE, up 0.97% from the previous close. It hit the new 52 week low recorded on 12 Jan' 2023 at Rs 2,310.10/share, while its 52 week high is Rs 3,447.55/share recorded on 7 Sep 2022.

The stock has given the highest 60.8% return in the last 3 years, however, it fell 24.58% in the last 1 year. It fell 3.03% in the last 1 week. Since its listing, it gave 38.97% positive return. It got listed on NSE on 8 Feb' 2018. 

According to the brokerage, Management's focus on R&D (with an annual expenditure of INR400-500m) and an increased wallet share from its existing customers should drive volume growth and expand EBITDA margin. Although GALSURF plans an across-the-board expansion in its products, its focus will mainly be on the Specialty Care Products segment.

2. NOCIL Ltd.

The brokerage placed a buy on NOCIL with a target price of Rs 316/share. It claims a potential upside up to 39% from its current level. NOCIL India is a part of the AMG (Arvind Mafatlal Group) of Industries. It is the small-cap Rubber Chemicals Manufacturer in India with a market capitalisation of Rs 3,814.83 crore., 

The current market price of NOCIL on NSE is Rs 228.95/share. Its 52 week high is Rs 294.90/share recorded on 12 Sep' 2022 and its 52 week low is Rs 190.70/share recorded on 24 Feb' 2022, respectively.

The stock has given maximum return in 3 years, around 94.77%. However, it fell 11.24% in the last 1 year. It gave 4.12% positive return in the last 5 yeras. 

According to the brokerage, Management expects to achieve debottlenecking at its existing units in the near term, even as it evaluates plans for the next three-to-five years. Specialized products make up 25% of the total revenue with limited room for expansion (industry standard is 12%). Despite a marginal 2% decline in global rubber consumption in CY22 till date compared to CY21 due to the current global slowdown, NOCIL has been able to maintain its market share.

3. Vinati Organics Ltd.

Motilal Oswal has a buy on the stock of Vinati Organics with a target price of Rs 2,740/share. It sees 37% potential return if stock is purchased at the given market price. Vinati Organics is a leading manufacturer of specialty chemical and organic intermediaries. It is a midcap company with a market capitalisation of Rs 20,604.20 crore. 

The stock last trades at Rs 2,004.65/share, down 0.51% from its previous close. Its 52 week low is Rs 1,674.20/share recorded on 24 Feb' 2022 and 52 week high is Rs 2,377/share recorded on 12 Sep' 2022, respectively.

The stock gave 101.37% in the last 3 years and 311.74% in the last 5 years, respectively. However, it declined by 2.82% in the last 1 year. 

According to the brokerage, The demand outlook for the ATBS segment remains quite strong going forward in 2H, as well as FY24. Veeral Organics Pvt. Ltd. (wholly owned subsidiary of VO) is also set to commence production of MEHQ, Guaiacol, and Iso Amylene in 1HFY24E, which should propel VO into the next leg of its growth story. Veeral Additives has commenced production of AOs and samples are being sent to customers for approval. Post amalgamation, VO would become the largest and the only doubly integrated manufacturer of AOs in India.

Disclaimer

The stocks have been picked from the brokerage report of Motilal Oswal. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.