Jefferies has released its latest sectoral update on Indian chemical stocks, delivering a mixed outlook as the industry continues to grapple with muted demand trends and intensifying global pressures. While the brokerage remains cautious on the near-term prospects of the sector, it has identified selective opportunities for investors, recommending a “buy” on PI Industries and Navin Fluorine, while retaining an “underperform” rating on SRF.
According to Jefferies, the global agrochemical landscape remains under stress. Major innovators in the segment are forecasting flat revenue growth in 2025, while pricing pressure in key markets like Latin America persists. Additionally, elevated Chinese exports are creating a supply glut, intensifying competitive pressure across global markets. Crop prices, meanwhile, remain volatile and have failed to offer any significant boost to sentiment.
The refrigerant gas (refgas) segment, another key sub-sector, also displayed weakness, with demand largely flat on a year-on-year basis during the March 2025 quarter. This indicates a broader slowdown in industrial consumption trends that is weighing on the performance of several chemical players.
PI Industries: Long-Term Upside Amid Short-Term Headwinds
Despite the overall softness, Jefferies has expressed optimism on PI Industries, assigning the stock a “buy” rating with a price target of ₹4,200, suggesting a potential upside of 9 percent. The brokerage acknowledged short-term headwinds in PI’s Custom Synthesis Manufacturing (CSM) portfolio and a slower-than-expected ramp-up in its pharma vertical. However, it noted that traction in newly commercialized products and biologics offers long-term potential. Valuation-wise, the stock currently trades one standard deviation below its historical average, presenting what Jefferies calls an “attractive entry point” for long-term investors.
Navin Fluorine: Earnings Visibility from New Product Launches
Navin Fluorine also finds a place in Jefferies’ buy list, backed by earnings visibility from new product launches in agrochemicals and Contract Development and Manufacturing Organization (CDMO) segments. The brokerage sees a promising outlook post the March quarter, especially with the recent long-term contract signed with global major Chemours. While near-term earnings estimates remain unchanged, Jefferies expects a robust Compounded Annual Growth Rate (CAGR) of 35 percent in EPS between FY2025 and FY2027. Its target price for Navin Fluorine stands at ₹5,280, implying a 23 percent upside.
SRF: Valuation Concerns Offset Modest Volume Recovery
On the other end of the spectrum, Jefferies has reiterated its “underperform” stance on SRF, assigning a target price of ₹2,336. While the company has seen a modest recovery in chemical volumes due to front-loaded US imports, Jefferies remains skeptical of a sustained cyclical upturn. It also highlighted valuation concerns, with the stock trading close to two standard deviations above its long-term average—a level the brokerage deems unattractive in the current environment of limited growth visibility.
Overall, Jefferies’ latest update underscores the complex dynamics facing Indian chemical stocks. While the sector as a whole faces near-term headwinds from global supply pressures and sluggish demand, select companies like PI Industries and Navin Fluorine stand out for their innovation pipeline, earnings visibility, and attractive valuations. However, Jefferies cautions that investors should remain discerning, especially in high-valuation names like SRF, where the risk-reward profile remains skewed amid uncertain recovery timelines.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
