Globally, the Specialty Chemicals business accounts for ~20% of the USD 4trillion Chemicals industry. From having an insignificant presence (4.5%) in this segment, India's share in Specialty Chemicals is expected to double over the next five years - at a ~12% CAGR to USD 64 billion by CY25, said Motilal Oswal Institutional Equities in its sector reports.

Various factors favor the Specialty Chemicals industry in India, including 1) strong domestic consumption - led by a young population (median age of 28 years), a high percentage (~67%) of which forms the working age group, 2) favorable labor cost (one-third that of China / half that of Vietnam), and 3) government impetus, it added.

In this sector initiation report, Motilal Oswal propound views on eight companies operating in India's Specialty Chemicals space: Atul (ATLP), Deepak Nitrite (DN), Vinati Organics (VO), Alkyl Amines (AACL), Navin Fluorine (NFIL), Galaxy Surfactants (GALSURF), Fine Organics (FINEORG), and NOCIL.

The brokerage house said that the doubling of capex over FY22-24E (from FY19-21 levels) would result in 52% revenue growth by FY24E (from FY21 levels), making these companies exciting plays. "We expect 70bps EBITDAM expansion to 25% by FY24E (FY20/21 was 22.5/24.3%). We initiate coverage with a positive outlook on the Specialty Chemicals space. DN is our top pick in the sector. We assign a Buy rating to DN, VO, GALSURF, and NOCIL; a Neutral rating to ATLP, AACL, NFIL, and FINEORG."

Disclaimer: IRIS has taken due care and caution in compilation of data for its web site. Information has been obtained by IRIS from sources which it considers reliable. However, IRIS does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. IRIS especially states that it has no financial liability whatsoever to any user on account of the use of information provided on its website.