Equity Research INDIA

October 21, 2020

BSE Sensex: 40544
Specialty chemicals
ICICI Securities Limited
is the author and
distributor of this report Price trend in Aug-20
Chemical industry has seen recovery with easing of lockdown and improvement
Sector Update
in` demand driving sequential improvement in volumes, though volumes are still
down on YoY basis. We expect SRF to continue to benefit with elevated spreads in
Specialty packaging films – BOPET / BOPP. BOPET spreads have been mostly stable
Chemicals despite factories normalising manufacturing capacity; BOPP has seen some dip.
Technical textiles’ profitability may improve sequentially on improving spreads
SRF (HOLD) and likely better volumes. R-22 prices have declined on seasonality and volumes
Galaxy Surfactants (BUY) in eight months dipped only 16.5%, vs 25% cut in the second phase-down, which
Sudarshan Chemicals may hurt volumes in the next four months. Galaxy Surfactants has seen lauryl
(ADD) alcohol prices dip QoQ, which may hurt margins. Pigment export volumes are
down only 5.4% YoY in two months, which is good for Sudarshan Chemical.
(Note: All prices stated are in Rs/kg; Q2FY21 includes data for Jul’20 and Aug20)
SRF Ltd: Strong BOPET spread continues in Q2FY21 too
 R-22 prices dipped 5.7% QoQ and 0.3% YoY to Rs189 in Q2FY21 and export
volumes were down 32% to 3,550te in the first two months of the quarter. Phase-
down 2 was expected to hurt volumes by 25% but, in eight months, R-22 export
volumes are down only 16.5%. Thus, it remains to be seen if volume decline
accelerates in the remaining four months of the year. Fluorspar (acid spar) prices are
down 3.2% QoQ / 8.1% YoY to Rs30. R-22 spread (to fluorspar and chloroform) was
Rs118 vs Rs123 in Q1FY21.
 MDC (methylene chloride) prices shrunk 0.5% QoQ / 13.7% YoY to Rs35. It was
also due to fall in chorine and methanol prices. We note MDC spreads should have
improved QoQ.
 NTCF prices dipped 1.8% QoQ / 3.3% YoY to Rs193. Caprolactam prices were
down 17.8% QoQ and 28.2% YoY to Rs81. NTCF-caprolactam spread rose to
Rs112 vs Rs98 in Q1FY21. We expect improvement in SRF’s technical textiles’
profitability in Q2FY21 on likely better volumes and improved spreads.
 BOPET prices were down 4.4% QoQ / 1.6% YoY at Rs119. PTA and MEG prices
dipped 14.3% QoQ / 39.3% YoY to Rs32 and were down 6.3% QoQ / 23.1% YoY to
Rs28, respectively, probably due to subdued crude oil prices. BOPET-PTA/MEG
spread fell 0.2% QoQ while it was up 30.4% YoY to Rs82 (vs Rs82 in Q1FY21). The
continuation of strong BOPET spread means SRF’s packaging film segment’s EBIT
margins are likely to remain elevated even in Q2FY21. Further, export volumes
dipped only 4.7% to 20kte in the first two months of Q2FY21.
 BOPP prices rose 0.9% QoQ and 0.7% YoY to Rs126 while polypropylene prices
rose 11.8% QoQ / fell 14.0% YoY to Rs65. BOPP-PP price spread was at Rs61, up
22.6% YoY, but it was down 8.5% QoQ.
Research Analysts:
Sudarshan Chemical (SCIL): Organic pigment prices dip 2.3% QoQ
Sanjesh Jain
[email protected]  Organic pigment prices were down 2.3% QoQ and up 2.5% YoY to Rs492 vs Rs503
+91 22 6637 7153
Sameer Pardikar in Q1FY21. Organic pigments are inclusive of all colours including CPC. Their export
[email protected] volumes dipped 5.4% YoY to 17.7kte in two months of Q2FY21
+91 22 2277 7637

Please refer to important disclosures at the end of this report

Speciality Chemicals sector, October 21, 2020 ICICI Securities
 Azo pigment mixture prices fell 7.3% QoQ and 14.8% YoY to Rs425 vs Rs458 in
Q1FY21.
 Inorganic pigment prices dipped 2.3% QoQ and 12.9% YoY to Rs87 vs Rs89 in
Q1FY21.

Galaxy Surfactants (GSL): Lauryl alcohol prices remain high

 Lauryl alcohol prices were at Rs92, down 5.5% QoQ but up 11.1% YoY, vs Rs97
in Q1FY21. This means gross margin can dip for Galaxy Surfactants in Q2FY21.

Vinati Organics
 Ibuprofen prices dipped 27.4% QoQ and rose 28.4% YoY to Rs2,482 (vs Rs3,420
in Q1FY21).
 IBB prices rose 2.9% QoQ and 1.2% YoY to Rs136 vs Rs132 in Q1FY21.

Atul Ltd
 2,4-D prices rose 5.5% QoQ, but fell 13.1% YoY to Rs156 (vs Rs148 in Q1FY21).
Export volumes were mostly flat at 2,974te in the first two months of Q2FY21.
 Para cresol prices were down 6.8% QoQ and 9.9% YoY at Rs177. Export volumes
fell 19.5% YoY to 1,670te for two months in Q2FY21.
 Epoxy prices dipped 3.2% QoQ and 7.1% YoY to Rs164. Export volumes dropped
20% YoY to 3,055te in first two months of Q2FY21.
 Resorcinol prices rose 7.1% QoQ and 2.5% YoY to Rs710. Export volumes were
up 57% YoY to 518te.

Gujarat Fluorochemicals
 PTFE prices dipped 2.3% QoQ, but rose 1.5% YoY to Rs676 (vs Rs692 in
Q1FY21). PTFE (to fluorspar) spread shrunk 2.2% QoQ, but increased 2.9% YoY
to Rs597 (vs Rs611 in Q1FY21). Export volumes were down 12% YoY to 1,591te
in first two months of Q2FY21.

SRF Ltd
Chart 1: R-22 prices dipped 5.7% QoQ Chart 2: Fluorspar prices are down 3.2% QoQ

R-22 Fluorspar

210 37
205
35
200
33
195
Rs/kg

Rs/kg

190 31
185
29
180
27
175
170 25
May-20
Jan-20

Jun-20

May-20
Jan-20

Jun-20
Feb-20
Mar-20

Mar-20
Jul-20

Feb-20
Oct-19

Apr-20

Oct-19

Jul-20
Apr-20
Aug-19
Sep-19

Aug-20
Nov-19
Dec-19

Nov-19
Dec-19
Aug-19
Sep-19

Aug-20

Source: I-Sec research, Commerce Ministry

2
 Speciality Chemicals sector, October 21, 2020 ICICI Securities

Chart 3: Chloroform prices dipped 13.8% QoQ Chart 4: R-22 spread shrunk 4.1% QoQ

Chloroform R22 - fluorspar spread

36 130
34 126
32
30 122
28 118
26 114
Rs/kg

24

Rs/kg
110
22
20 106
18 102
16 98
14
12 94
10 90

May-20
Jan-20

Jun-20

May-20
Mar-20

Jan-20

Jun-20
Feb-20

Mar-20
Feb-20
Oct-19

Apr-20

Jul-20

Jul-20
Oct-19

Apr-20
Aug-19
Sep-19

Aug-20
Nov-19
Dec-19

Nov-19
Aug-19
Sep-19

Dec-19

Aug-20
Source: I-Sec research, Commerce Ministry; Note: For calculating spread, we have assumed 1.3kg of fluorspar; and 1.5kg chloroform prices for
1kg of R-22
Chart 5: MDC prices dipped 0.5% QoQ

MDC

45

40
Rs/kg

35

30
May-20
Jan-20

Jun-20
Mar-20
Feb-20
Oct-19

Apr-20

Jul-20
Nov-19

Dec-19
Aug-19

Aug-20
Sep-19

Source: I-Sec research, Commerce Ministry

Chart 6: BOPET prices fell 4.4% QoQ Chart 7: BOPET/PET spread shrunk 0.2% QoQ

BOPET BOPET - PET spread

135 90

80
125

70
Rs/kg

Rs/kg

115
60

105
50

95 40
May-20
Jan-20

Jun-20

May-20
Mar-20

Jan-20

Jun-20
Feb-20

Mar-20
Jul-20
Oct-19

Apr-20

Feb-20
Oct-19

Apr-20

Jul-20
Nov-19
Aug-19
Sep-19

Dec-19

Aug-20

Nov-19
Dec-19
Aug-19
Sep-19

Aug-20

Source: I-Sec research, Commerce Ministry; Note: For calculating spread, we have assumed 1kg of PET for 1kg of BOPET

3
Speciality Chemicals sector, October 21, 2020 ICICI Securities

Chart 8: BOPP prices rose 0.9% QoQ Chart 9: BOPP/PP spread dipped 8.5% QoQ

BOPP BOPP - PP spread

140 80
75
135 70
65
130 60
55

Rs/kg
Rs/kg

125 50
45
120
40
115 35
30
110 25

May-20
Jan-20

Jun-20
May-20
Jan-20

Jun-20
Mar-20

Feb-20
Feb-20

Mar-20
Apr-20

Jul-20
Jul-20

Oct-19
Oct-19

Apr-20

Aug-19
Sep-19

Aug-20
Aug-19
Sep-19

Aug-20

Nov-19
Dec-19
Nov-19
Dec-19

Source: I-Sec research, Commerce Ministry; Note: For calculating spread, we have assumed 1kg of PP for 1kg of BOPP

Chart 10: NTCF prices declined 1.8% QoQ Chart 11: NTCF/caprolactam spread rose14.3%
QoQ

NTCF NTCF - Caprolactam spread

280 200
260 180
240 160
220 140
120
200
Rs/kg

Rs/kg

100
180
80
160 60
140 40
120 20
100 -
May-20
Jan-20

Jun-20
Feb-20
Mar-20

May-20
Jul-20

Jan-20

Jun-20
Oct-19

Apr-20

Feb-20
Mar-20
Aug-19
Sep-19

Aug-20

Jul-20
Oct-19

Apr-20
Nov-19
Dec-19

Aug-19
Sep-19

Aug-20
Nov-19
Dec-19

Source: I-Sec research, Commerce Ministry; Note: For calculating spread, we have assumed 1kg of caprolactam for 1kg of NTCF

Galaxy Surfactants
Chart 12: Lauryl alcohol prices fell 5.5% QoQ

Laurly Alcohol

105

100

95
Rs/kg

90

85

80

75
Jan-20

May-20

Jun-20
Mar-20
Feb-20
Oct-19

Apr-20

Jul-20
Nov-19

Dec-19

Aug-20
Aug-19

Sep-19

Source: I-Sec research, Commerce Ministry

4
Speciality Chemicals sector, October 21, 2020 ICICI Securities

Atul Ltd
Chart 13: 2,4-D prices rose 5.5% QoQ Chart 14: Para cresol prices were down 6.8% QoQ

2,4 D Para Cresol

190 210
180
200
170
160 190
Rs/kg

Rs/kg
150 180
140
170
130
120 May-20 160

May-20
Jan-20

Jun-20

Jan-20

Jun-20
Mar-20

Mar-20
Feb-20

Feb-20
Oct-19

Apr-20

Oct-19

Apr-20
Jul-20

Jul-20
Nov-19

Nov-19
Dec-19

Dec-19
Aug-19
Sep-19

Aug-20

Aug-19
Sep-19

Aug-20
Source: I-Sec research, Commerce Ministry
Chart 15: Epoxy prices dipped 3.2% QoQ Chart 16: Resorcinol prices rose 7.1% QoQ

Epoxy Resourcinol

200 850
800
750
180
700
Rs/kg

Rs/kg

650
160
600
550
140 500
May-20

May-20
Jan-20

Jun-20

Jan-20

Jun-20
Feb-20

Feb-20
Mar-20

Mar-20
Apr-20

Jul-20

Apr-20

Jul-20
Oct-19

Oct-19
Aug-19
Sep-19

Aug-20

Aug-19
Sep-19

Aug-20
Nov-19

Nov-19
Dec-19

Dec-19

Source: I-Sec research, Commerce Ministry

Vinati Organics
Chart 17: Ibuprofen prices dipped 27.4% QoQ

Ibuprofen

5,500
5,000
4,500
4,000
3,500
3,000
Rs/kg

2,500
2,000
1,500
1,000
500
-
May-20
Jan-20

Jun-20
Feb-20

Mar-20

Apr-20

Jul-20
Oct-19
Aug-19

Sep-19

Aug-20
Dec-19
Nov-19

Source: I-Sec research, Commerce Ministry

5
Speciality Chemicals sector, October 21, 2020 ICICI Securities

Chart 18: IBB prices rose 2.9% QoQ Chart 19: Benzene prices dipped 4.5% QoQ

Isobutyl Benzene Benzene

70
190
60
170
50
150
Rs/kg

Rs/kg
130 40

110 30

90 20

May-20

May-20
Jan-20

Jun-20

Jan-20

Jun-20
Feb-20

Feb-20
Mar-20

Mar-20
Apr-20

Jul-20

Apr-20

Jul-20
Oct-19

Oct-19
Aug-19
Sep-19

Aug-20

Aug-19
Sep-19

Aug-20
Nov-19

Nov-19
Dec-19
Dec-19

Source: I-Sec research, Commerce Ministry

Gujarat Fluorochemicals
Chart 20: PTFE prices dipped 2.3% QoQ Chart 21: PTFE/fluorspar spread dipped 2.2% QoQ

PTFE PTFE - Fluorspar spread

750
660
725
640
700
620
675 600
Rs/kg

Rs/kg

650 580
625 560
600 540
575 520
550 500
May-20

May-20
Jan-20

Jun-20

Jan-20

Jun-20
Feb-20

Feb-20
Mar-20

Mar-20
Apr-20

Jul-20

Apr-20

Jul-20
Oct-19

Oct-19
Aug-19
Sep-19

Aug-20

Aug-19
Sep-19

Aug-20
Nov-19

Nov-19
Dec-19

Dec-19

Source: I-Sec research, Commerce Ministry

Sudarshan Chemical Industries

Chart 24: Pigment prices declined 2.3% QoQ Chart 25: Azo pigment mixture prices declined
7.3% QoQ
Pigments Other, Including Mixtures Of Colouring Matter

550

500
500
Rs/kg
Rs/kg

450

450 400
May-20
Jan-20

Jun-20
Mar-20
Feb-20
Oct-19

Apr-20

Jul-20
Nov-19
Dec-19
Aug-19
Sep-19

Aug-20
May-20
Jan-20

Jun-20
Mar-20
Feb-20
Oct-19

Apr-20

Jul-20
Nov-19
Dec-19
Aug-19
Sep-19

Aug-20

Source: I-Sec research, Commerce Ministry

6
Speciality Chemicals sector, October 21, 2020 ICICI Securities
Chart 26: Inorganic pigment prices fell 2.3% QoQ

Othr Colrng Matr And Othr Prptns (Mostly Inoganic) - Export

115
110
105
100
95

Rs/kg
90
85
80
75
70

Jan-20

May-20

Jun-20
Mar-20
Feb-20
Oct-19

Apr-20

Jul-20
Nov-19

Dec-19

Aug-20
Aug-19

Sep-19
Source: I-Sec research, Commerce Ministry

7
Speciality Chemicals sector, October 21, 2020 ICICI Securities
Price charts
SRF Galaxy Surfactants
5000 2200
4500 2000
4000
1800
3500
1600

(Rs)

(Rs)
3000
2500 1400
2000 1200
1500 1000
1000
800

Oct-18
Oct-17

Apr-20
Apr-18

Apr-19
Oct-19

Oct-20

Dec-19
Jun-18
Feb-18

Nov-18

Aug-19

Apr-20
Sep-20
Mar-19
Sudarshan Chemical
700
600
500
(Rs)

400
300
200
Oct-17

Apr-19

Oct-20
Apr-18
Oct-18

Oct-19
Apr-20

Source: Bloomberg

8
 Speciality Chemicals sector, October 21, 2020 ICICI Securities

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