The October-December quarter earnings remained mixed this fiscal as core industries reported weak earnings while niche sectors like specialty chemicals posted a strong quarter. In a recent research report by Edelweiss, the brokerage noted that the management commentaries remained positive as rising enquiries from customers and strong growth visibility drove optimism in the sector, reflecting in increasing capex outlay.

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Due to softening input prices, the revenue, on an aggregate level, declined 2 percent YoY while EBITDA margins remained strong driven by softening raw material prices and a better product mix, said the report.

Edelweiss believes that the sector will remain buoyant as companies share a strong growth outlook.

Betting on SRF and Aarti Industries, the brokerage firm said that the former is confident of achieving 50 percent growth in its business in FY20 while the latter will benefit from the commercialization of its two large products over the ensuing two quarters.

Due to coronavirus, the impact on the sector is expected to remain mixed. Aarti will benefit over price increase in some of its products while Galaxy Surfactants will benefit by opening up markets in different countries, the report added.

Therefore, Edelweiss raised its target multiple for SRF and Aarti Industries given strong growth visibility. The top pick from the sector is Aarti Industries considering its attractive valuations.

The brokerage further said that any correction in the sector offers opportunities and stocks that must be grabbed are SRF, Fine Organics and Galaxy Surfactant.

First Published:Feb 25, 2020 1:25 PM IST