Recommendations from Chemicals & Petrochemicals Sectors

Recommendations from Chemicals & Petrochemicals Sectors

The scrips in this column have been recommended with a 15-day investment horizon in mind and carry high risk. Therefore, investors are advised to take into account their risk appetite before investing, as fundamentals may or may not back the recommendations. 

SUPREME PETROCHEM LTD. 

CMP - Rs 389.15
BSE CODE : 500405
Volume : 16,058
Face Value : Rs 10
Target : Rs 425
Stoploss : Rs 356 (CLS)


Supreme Petrochem is a manufacturing and trading company in the petrochemicals’ sector. Styrenics is the primary segment of Supreme Petrochem. It is considered as one of the largest single site polystrene (PS) producer, accounting for 2 per cent of the world capacity. On the financial front, its standalone quarterly results reveals that net sales rose by 3.76 per cent from Rs 668.88 crore in Q2FY20 to Rs 694.06 crore in Q2FY21. The operating profit increased from Rs 32.51 crore in Q2FY20 to Rs 123.08 crore in Q2FY21, yielding a massive increase beyond 200 per cent. The net profit also increased beyond 100 per cent to Rs 86.15 crore in Q2FY21 as compared to Rs 36.07 crore in Q2FY20. Over the years, the company has rewarded its shareholders with constant dividends year after year. The payout ratio was recorded between 35 to 50 per cent of PAT. Considering the positive growth outlook and strong financials, we recommend BUY.

TATA CHEMICALS LTD 

CMP - Rs 522.85
BSE CODE : 500770
Volume : 11,20,045
Face Value : Rs 10
Target : Rs 565
Stoploss : Rs 485 (CLS)

Tata Chemicals is a holding company and a manufacturer of soda ash and sodium bicarbonate for diverse industries such as glass, detergents, silicates, textiles, food, pharmaceuticals, animal feed, mining and chemical processing. Considering the consolidated quarterly results, its net sales fell by 5.84 per cent from Rs 2,771.27 crore in Q2FY20 to Rs 2,609.35 crore in Q2FY21. The operating profit dropped from Rs 650.75 crore in Q2FY20 to Rs 454.80 crore in Q2FY21. The net profit also declined around 66 per cent to Rs 121.67 crore in Q2FY21 as compared to Rs 365.12 crore in Q2FY20. The decline in profit can be tracked to increase in depreciation cost of around 16 per cent. In spite of the declining trend, the financials continue to remain cash-positive. Going forward, chemical market consumers may value sustainability and prioritize products based on circularity and carbon footprint, driving chemical companies to accelerate their technologies. Hence, we recommend BUY.

(Closing price as of Jan 12, 2021)

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