Domestic brokerage and research firm Nirmal Bang has recommended ‘Buy’ rating on two chemical stocks – Fine Organic Industries and Neogen Chemicals after their respective earnings for the third quarter of the current financial year or Q3 FY23 ending December 2022.
chemical stock to buy Recommended by Nirmal Bang –
Fine Biological Industries: Fine Organic’s overall 3QFY23 EBITDA came in ~18% below brokerage estimates due to lower-than-expected revenue growth and margin normalization after three consecutive quarters of above-average EBITDA margins. Revenue came in below estimates due to lower RM prices and a significant decline in freight costs.
“The company has started entering into long-term contracts similar to pre-Covid times. We remain positive about the company’s long-term growth prospects and it remains our top pick in the Oleochemicals sector. Post earnings revision, we upgrade FINORG to BUY with revised target price (TP) 5,500 (before 6,800) The recent correction in the share price (~16% in the last month) has made the risk-reward favourable,” the note said.
Planning Chemicals: Neogen Chemicals’ 3QFY23 EBITDA came in 23% ahead of its estimates on the back of strong growth in both organic and inorganic segments. Organic business growth was a function of both volume and pricing. The outlook for the CSM business remains strong.
The management reiterated that the CSM business is on track to achieve ~20% of total revenue in FY24. NEOGEN is currently working on 23 molecules that may have potential commercial opportunities 21 billion according to the management.
“We like Neogen’s ability to handle complex opportunities in existing business and believe there is a long runway for growth in the CSM business with innovators. While execution is key in new business, we are looking for non-linear growth.” We offer high upside potential. Over the medium to long term. After revising earnings, we upgrade NEOGEN to BUY with a revised target price (TP) of Rs 1,500 (earlier Rs 1,570). Premium valuation of NEOGEN in enhanced bromine Owing to its distinctive presence is the range and optionality in the battery chemical segment.”
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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