Q3 Preview: PI Industries preferred pick of Jefferies from chemical sector; Anupam Rasayan to see strong recovery

Q3 Result preview: Expectations remain weak for the chemical sector in the near term and the chemical manufacturers are likely to see a soft Q3. The impact of weak demand, inventory destocking, lower realizations continue to be felt by manufacturers. Exporters are also likely to not see much respite.

Impact of uneven distribution of monsoon is also likely to be felt by agrochemical manufacturers. Amidst softness, and weakness likely to persist during Q3, any early signs of recovery will also be watched for by investors and analysts. Some of the few companies that can see good performance in Q3 as per Jefferies India Pvt ltd.

While n India my see strong recovery in Q3, may also see better sequential performance. Jefferies prefer on healthy volume growth in FY25 and reasonable valuations. – The companies as PI Industries into contract research manufacturing services also have a patented range of products and hence have seen a much lower impact on its financials during first half amidst ongoing weakness seen by chemical manufacturers.

Analysts at Jefferies India Pvt Ltd see exports to grow for PI Industries though domestic performance may remain subdued. PI Industries Custom Synthesis Manufacturing (CSM) revenues as per Jefferies are expected to rise 12% yoy though may be lower sequentially as first half had remained strong for PI Industries. Domestic revenues could remain weak rising just 2% yoy (40% sequentially) given elevated inventory levels in India and pricing pressure from generics.

As a result, 3Q Ebitda (earnings before interest tax depreciations and amortization), for PI Industries as per Jefferies should see a 10% yoy growth though margins may decline sequentially on a negative operating leverage. Pharma segment revenues for PI Industries should also grow sequentially on planned product schedules with Ebitda margins turning positive. to see strong recovery: Analysts at Jefferies expect Anupam Rasayan to report a strong recovery in 3Q as customers had pushed out orders to second half on elevated channel inventories and Chinese dumping.

As a result, Ebitda should see 41% year-on-year rise ( up 23% sequentially) with the management having earlier guided for second half FY24 revenues to be 1. 5 times of first half of FY24. – Analysts at Jefferies expect Navin Fluorine to report modest year on year rise (up 1%) in revenues but a sharp sequential recovery ( up 21%) on ramp-up of the HPP plant post the shutdowns in second quarter and revenue contribution from R32 plant post stabilization.

Specialty chemicals revenues should also grow 9% y/y after production issues saw sales deferrals from 2Q to 3Q. We expect CDMO revenues to remain weak (-20% y/y) as the segment continue to exhibit a lumpy trend. Consol Ebitda, however, should see 8% y/y decline on higher opex.

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