Top Chemical Stocks in India for 2023

Chemicals are everywhere, inside us, surrounding us, playing around. These very chemicals are used to manufacture products we use in day to day activities. Look at Fevicol; it's just a combination of formaldehyde and urea. Take a look at the wall paints in your homemade of zinc oxide, zinc sulfide, lithopone, and titanium dioxide. 

Each and everything around you is loaded with chemicals like these. And there are listed companies that make and outsource them.

The chemistry of chemicals and the stock market are intertwined, and today we will take a look at the chemicals industry and a few stocks based on it. So, let's get started.

Understanding Chemical Industry in India

The chemical industry is one of the significant contributors to the Indian economy, contributing roughly 7% of the GDP of the country. India holds a strong position in the trade of chemicals and ranks 14th in export and 8th in imports globally. India's major chemical hubs are Gujarat, Maharashtra, Odisha, Tamil Nadu, Andhra Pradesh, and Uttar Pradesh. 

The FDI inflow in the chemical sector reached US$ 18.69 Billion between April 2020 and June 2021. The demand for chemicals is also somewhat related to the need for food processing, personal care & home care. The Indian speciality chemicals companies are expanding their capacities to cater to the rising demand. 

As far as the government policies are concerned, they plan to introduce production-linked incentives (PLI) schemes to promote domestic manufacturing of agrochemicals. Under the Union Budget 2021-22, the government allocated ₹233.14 crore for the department of chemicals and petrochemicals. 

Below is a chart depicting the past and forecasted market size of the Chemical sector in India.

Moving forward, let’s take a look at a few companies in the chemical industry in India.

Top 5 Chemical Stocks in India

Aarti Industries

NSE: AARTIIND         BSE: 524208

The company was incorporated in 1984. Aarti Industries is a leading manufacturer of speciality chemicals and pharmaceuticals in India. The chemicals manufactured by the company are used in pharmaceuticals, agrochemicals, polymers, additives, surfactants, pigments, dyes, etc.

PE ratio, ROA, and ROE are among the top indicators to analyse a company's financial performance. Let’s take a look at what these ratios are telling us.

As of April 2022, Aarti Industries has a PE ratio of 28.50, which is comparatively high and overvalued. ROA, or return on assets, show how efficiently a company can convert its investments on assets into profit. Aarti Industries has a ROA of 7.55%. ROE, or return on equity, measures the profits the firm generates for its shareholders. The company has an ROE of 16.27%, which is comparatively better.

The company has shown a good profit of 17.51% in the past 3 years. Below is the 5-year price chart of the company along with the CAGR return. 

Pidilite Industries

NSE: PIDILITIND      BSE: 500331

Pidilite Industries has pioneered in consumer goods and speciality chemicals in India since its inception in 1969. The brands under the company are Fevicol, Fevicol MR, Dr Fixit, Fevikwik, M-Seal, Fevistik, Fevicryl and Hobby Ideas. 

As far as our top 3 matrices for the day are concerned, i.e. PE, ROA and ROE, the company has, on April 2022, a PE ratio of 104.61, which indicates overvaluation. ROA of the company is 11.45% which is not a very good sign for future prospects. And the ROE of the company is 21.65, which is a good sign. Also, the company is virtually debt-free and has a high promoter holding of 69.89%. Below is the 5-year price chart of the company along with its CAGR return.  

Supreme Petrochem

NSE: SUPPETRO   BSE: 500405

A joint venture between Supreme Industries ltd. and the Rajan Raheja group is Supreme Petrochem ltd. or SPL. The company is the leader in the Polystyrene business with a 50% market share. The company's product range includes General Purpose Polystyrene, Speciality Polystyrene, Masterbatches, High Impact Polystyrene, and Compounds.

The PE ratio of the company is 12.94, which is a low number indicating undervaluation. ROA of the company is 31.72, which is a good sign indicating that the company is utilising its assets efficiently. The return on equity of the company is 54.94. The company has shown a good profit growth of 60.21% for the past year but a poor revenue growth of 1.72%. 

The company is virtually debt-free and has a high promoter holding of 63.93%. 

Below is the 5-year CAGR graph of price.

Gujarat Fluorochemical

NSE: FLUOROCHEM   BSE: 542812

Gujarat Fluorochemicals Limited, which was earlier known as Inox Fluorochemicals Limited, was incorporated in 2018. The company manufactures and trades in refrigerant gasses, caustic soda, chloromethane, polytetrafluoroethylene (PTFE), fluoropolymers, fluoro monomers, speciality fluoro intermediates, speciality chemicals and allied activities.

The PE ratio of the company is 49.45, which is comparatively overvalued. The ROA of the company is -3.94%, which is a bad sign for future growth. The ROE of the company is -6.38%, which is again a bad sign, but on the flip side, the company has a high promoter holding of 66.35% and a strong degree of operating leverage. 

Below is the 5-year CAGR graph of its price.

Tata Chemicals

NSE: TATACHEM   BSE: 500770

Tata Chemicals, or TCL, was established in 1939 and is the second-largest producer of soda ash in the world. 

The company's products are Alkali products like Soda Ash, Sodium Bicarbonate, Caustic Soda, Crushed Refined Soda; Halogen products like Chlorine-based products, Bromine-based products; and Salt products like Industrial Salt, Livestock Salt, Animal Salt, Gypsum. 

The PE ratio of the company is 39.92, which is a sign of overvaluation. The ROA of the company is 3.41% which is not a very good sign for future prospects. While the ROE is 3.80% 

the company has maintained a healthy ROCE of 23.60% over the past 3 years and is virtually debt-free.

Below is the 5-year CAGR graph of its price.

Conclusion

That was all about the chemical sector, but there are so many sectors in Indian stock markets that you can check out only on Ticker by Finology, your stock research companion that has stock analysis tools, peer comparison, bundles, and so much more.

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*Disclaimer: The stock(s) discussed above aren't recommendations from Finology, they are only picked to make you understand the concept.