Indian chemical stocks have outperformed their benchmarks this year, benefiting from the fact that China's chemical industry faces the dual threat of pollution control and U.S. tariffs.
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Indian chemical stocks outperformed the benchmark Mumbai Sensex index this year, and some analysts believe that Indian chemical stocks have benefited from the plight of similar Chinese competitors, and china's chemical industry is facing the threat of pollution control and US tariffs.
Shares of Indian companies such as Atul, Aarti, Fine Organic and Vinati Organic have risen 15 to nearly 30 percent so far this year, while the S&P BSE Sensex 30 index is up just 8 percent. Shares of SRF, which makes textiles, chemicals, films and plastics, surged more than 51 percent in 2019. In addition, analysts said the companies are expanding their production capacity to meet strong demand at home and abroad.
Nav Bhardwaj, Mumbai-based analyst at Anand Rathi Equity Brokers, said: "This opportunity is prompting many of our local companies to invest all their cash in capacity growth. We expect the industry to gain an advantage from this expansion over the next 3-4 years, with the average annual revenue of top companies growing by 12%-15%. ”
Ratings agency Crispil said in a note on Tuesday that China accounts for about 20 percent of global specialty chemical revenues, while the closure or transfer of capacity in 50 chemical production clusters has been caused by China's tightening of environmental standards.
Crisil said the new requirements have increased costs for Chinese companies and prompted users around the world to look for other suppliers, including Indian manufacturers. The rating agency expects capital expenditures by Indian chemical manufacturers to increase by 70 per cent to Rs 130 billion (US$1.9 billion) by 2020, compared to Rs 75 billion in FY2017 and FY2018.
"Due to improved environmental compliance and cost competitiveness, the utilization of new capacity will remain high in the medium term." Anuj Sethi, senior director at Crisil, said, "As a result, India's share of specialty chemicals in global supply chains is expected to rise by 100 basis points in fiscal 2022, up from 4.2 percent in the previous fiscal year to 5.2 percent." (End)
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