2 chemical stocks to buy post Q3 results, as recommended by Nirmal Bang

Domestic brokerage and research firm Nirmal Bang has recommended ‘Buy’ ratings on two chemical stocks - Fine Organic Industries and Neogen Chemicals after their respective earnings for the third quarter ended December 2022 of the current fiscal or Q3 FY23.

Chemical stocks to buy as recommended by Nirmal Bang -

Fine Organic Industries: Fine Organic’s overall 3QFY23 EBITDA came in ~18% below the brokerage's estimate on account of lower-than-expected revenue growth and margin normalization after three consecutive quarters of above-average EBITDA margin. Revenue came in lower than estimate on account of lower RM prices and significant decline in freight costs. 

“The company has started to enter into long-term contracts similar to pre-covid times. We continue to remain positive about the company’s long-term growth prospects and it remains our best pick in the Oleochemicals space. After earnings revision, we upgrade FINORG to BUY with a revised Target Price (TP) of ₹5,500 (earlier ₹6,800) as the recent correction (~16% in last month) in stock price has made risk-reward favourable,” the note stated.

Neogen Chemicals: Neogen Chemicals’ 3QFY23 EBITDA came in 23% ahead of its estimate on the back of strong growth in both Organic as well as Inorganic segments. Organic business growth was a function of both volume and pricing. The outlook for CSM business remains strong, it said. 

The management reiterated that CSM business is on track to achieve ~20% of the overall revenue in FY24. NEOGEN is currently working on 23 molecules wherein the potential business opportunity could be to the tune of ₹21 bn, as per management.

"We like Neogen's ability to handle complex opportunities in the existing business and believe that there is a long runway for growth in the CSM business with the innovators. While execution remains the key in the new business, we assign higher probability for non-linear growth over the medium to long term. Post earnings revision, we upgrade NEOGEN to BUY with a revised target price (TP) of Rs1,500 (earlier Rs1,570). NEOGEN’s premium valuation is on account of its niche presence in value-added bromine chain and optionality in the Battery Chemicals segment."

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.