Top 10 chemical companies to invest in India

Articles > Submitted by DynamicInvestor on 4/29/2020 | Views: 1129

In this post, I have dig through chemical companies in India that have very good potential to give excellent returns in next 5 to 10 years. All of them might not be debt free companies however I have selected them based on their management, growth potential, order flow, products diversification and lesser debts.

Table of Contents

    Indian chemical companies were in focus even before Corona issues as China had to shut down many chemical companies due to polution problem. After Corona as part of derisking, many countries are focussing on countries other than China and India is in focus because of availability of cheap labor, skilled workers and government push.

    Thoguh couple of chemical companies stocks have rallied in last couple of weeks, however still from long term perspective they are available at reasonable valuation and one can do further research on these companies before investing. 

    Bharat Rasayan Ltd.

    Bharat Rasayan Ltd. is engaged in manufacturing and marketing of Insecticides, Herbicides, Fungicides, plant growth regulators etc. It exports its products to over 60 countries. It has 30000 dealers and 3500 distributors besides other tie-ups etc. in India.

    Currently available at around 3000 crores of market cap and P/E of 18 with ROCE 32%. Though it's not highly dividend paying company however it has 0.02% dividend yield. Debt to Equity is 0.37 and PEG ratio 0.46. With 74% promoters holding and good cash flow with good EPS growth, Bharat Rasayan Ltd can be a good compounder from here.

    Transpek Industry Ltd.

    Transpek Industry has history of more than 50 years in manufacturing chemicals. These chemicals are related with Agro, Dyes, Pharmaceuticals, Polymer, Speciality Chemicals, Surfactant etc. With its expertise in handling Chlorine and Sulphur, Transpek has indigenously developed process for chlorinated chemicals like Thionyl Chloride and various Acid and Alkyl Chlorides.

    Currently available at 919 crores of market cap and P/E of 11 with ROCE 26.58%. It also has very good dividend yield of 1.21% (rare in chemical companies). Debt to equity 0.36 and PEG ratio 0.22. With 58% promoters holding and consistent cash flow with very good EPS growth, Transpek Industries Ltd can be a very good compounder.

    It has 10 years contract with DuPont USA and recently capacity expansion was done and another capex is pending in Telangana for which the land has already been acquired. Promoters are known for their business ethics, reliability and efficiency. A proven compounder already in last 5 years and expected to be a very good compounder in future also.

    IOL Chemicals & Pharmaceuticals Ltd.

    IOLCP is India's one of the leading generic phamaceuticals company, and is significant player in organic chemial space. It is leading manufacture of Ibuprofen, MH, Lamotrigine, and other 3 APIs. 10 more APIs are in the advanced stage of development. Its speciality chemicals are used in packaging, textiles, pharmaceuticals, food processing, pesticides and paint industries.

    Currently available at 1731 crores of market cap and P/E of 4.64 with ROCE 55%. It has dividend yield of 0.99%. Recently it has become a debt free company. PEG ratio is 0.03. Thought promoters holding is just 41% however few big players are also holding significant % in this company. Recently management has come on TV and talked a lot of good thing about the company and its future. It has very good cash flow and excellent EPS growth in last two years. As the P/E is just 4.64, even if we consider its P/E as 10 seeing the demand of its products and focus on APIs and other chemicals in India, it can easily double from here in coming time. IOLCP can be a good compounder in future.

    The low P/E gives negative signals as there is something that market has seen that has resulted in low P/E, so extra bit of caution is needed. However, it looks a good company particularly after recent promoters interactions and company being debt free now.

    Paushak Ltd.

    Paushak Ltd. has established a multi-product capabilities in Phosgene & is derivatives manufacturing. Due to complexity in producing its products, the entry barrier for other companies is big. The chemicals produced by Paushak Ltd. are used in pesticides, phamaceuticals, dyes, plastics, perfumes etc. It is associated with Alembic group.

    Currently available at 647 crores of market cap and P/E of 17 with ROCE 26.53%. It has dividend yield of 0.24%. It's a debt free company with PEG ratio 0.63. With promoters holding of 66%, consistent cash flow with good EPS growth, Paushak Ltd. can be a good compounder.

    Fairchem Speciality Ltd.

    Fairchem Speciality Ltd. is into Aroma Chemicals, Nutraceuticals and Oleochemicals business. It has around 65+ prodcuts. Fairchem is India's largest manufacturer of Dimer acid used in many consumer products including paints. It's business model is to procure waste generated from other industries and convert them into value added products.

    Currently available at 1800 crores of market cap and P/E of 12 with ROCE 18.26%. It has dividend yield of 0.54%. It's debit to equity ratio is 0.75 with PEG ratio 1.09. With promoters holding of 74% including 48% as foreign promoters, consitent cash flow and good EPS growth, Fairchem Speciality Ltd. can be a good compounder from here.

    Neogen Chemicals Ltd.

    Neogen Chemicals Ltd. is one of the largest manufacturers of Bromine Derivatives, Lithium Salts and Grignard Compounds in India. Its products include Organo Bromine Compounds, Speciality Chloro Compounds, Grignard Reagents, Advance Intermediates, Inorganic Broine Compounds and Lithium salts.

    Currently available at 1069 crores of market cap and P/E of 35 with ROCE 25%. It has dividend yield of 0.32%. Debt to equity 0.64 with PEG ratio 0.85. With promoters holding of 70%, Neogen Chemicals Ltd. can be a steady compounder.

    Vinati Organics Ltd.

    Vinati Organics Ltd. is specialty chemical company, focussing on manufacturing specialty chemicals and organic intermediaries. It is world leader in two of its main products, IBB and ATBS. It exports its products into 22 countries. It manufactures Butyl Phenols, Speciality Monomers, Speciality Aromatics, Polumers and other categories of products. It has already completed its capacity expansion due to huge demand and few capex are in pipeline.

    Currently available at 10100 crores of market cap and P/E of 29 with ROCE 45. It has dividend yield of 0.51%. It is a debt free company with very renowned promoters having PEG ratio 1.08. With promoters holding of 74%, consitent cash flow and good EPS growth,  Vinati Organics Ltd. can be a very good, long term compounder.

    PI Industries

    PI Industries Ltd. is the largest seller of granular formulations segments. It is also biggest producer of generic molecules like Profenofos, Ethion, Phorate. It serves into Agrochemicals, Specialty products. It is one of the proven agro chemical company in India and exports into many countries.

    Currently available at 21000 crores market cap and P/E of 44 with ROCE 24%. It has dividend yield of 0.26%. It is a debt free company with PEG ratio 2.78. With promoter holding of 51%, consistent cash flow and good EPS growth, PI Industries is a consistent compounder and it is expected to be a very good compounder in future.

    Atul Ltd.

    Atul Ltd. is an improvement driven, integrated chemical company serving 6000 customers from 27 industries across the world. It is one of the largest integrated chemical company in India. It's products can be categorized into Aromatics, Bulk Chemicals and Intermeidates, Colors, Crop Protection Bulk Actives, Crop Protection Retail, Floras, Pharmaceuticals and Intermeidates, Polymers Performance Materials, Polymers Retail.

    Currently available at 14000 crores market cap and P/E of 21 with ROCE 27. It has dividend yield of 0.30%. Its almost a debit free company with Debt to Equity 0.03 with PEG ratio 1.52. With promoters holding of 44.81%, consistent cash flow and EPS growth, Atul Ltd. is already a proven compounder in past and can be a very good steady compounder in future.

    Navin Flourine International Ltd.

    Navin Flourine International Ltd is one of the largest and most respected Indian manufacturers of speciality flourochemicals. It is pioneers in manufacturing of refrigerant gases in India, It is also into Inorganic flourine chemistry, large scale manufacturer of flourine based intermediates and CRAMS.

    Currently available at 7934 crores of market cap and P/E of 46 and ROCE 21. It has dividend yield of 0.50%. It is a debt free company with PEG ratio 2.20. Though the promoter holding is just 31%, it has been a good compounder in last 5 years. Recently it has grabbed an order from MNC. Seeing the demand of refrigerant and its position in the market, Navin Flourine can be a good compounder.

    Bonus: Alkyle Amines Chemicals Ltd.

    Alkyle Amines is a global supplier of amines and amines based chemicals to the pharmaceuticals, agrochemical, rubber chemical, water treatment industries and other industries. It has controlling stake in Diamines and Chemicals Ltd that is the only manufacturer of Ethyleneaminies in India. 

    Currently available at 3651 crores of market cap and P/E of 22 and ROCE 28.45%. It has dividend yield of 0.56% with minor debts. It's debt to equity ratio is 0.19 and PEG ratio is 1.55. Promoters holding is 74%. It has consistent cash flow and EPS growth. It's sale has grown @15% in last 10 years and stock price @46% in last 10 years.


    Disclaimer: These companies are selected based on my own research and posted here for educational and informational purpose. Readers are advised to do their own research and contact financial advisor before making investment decision.

    Website disclaimer: The views, opinions, investment advices (if any) expressed by author on are their own and not that of the website or its management. Users are advised to contact certified financial advisor before making investment decisions.

    Submitted by DynamicInvestor on Wednesday, April 29, 2020

    Be dynamic, change your stance based on the situation. This is the mantra of Investing.


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