Most Wanted Chemical Stocks of 2024

Did you know that, knowingly or not, we rely on chemicals every single day?

Chemicals have truly become essential to modern life, impacting everything from the food we eat and the clothes we wear to the medicines we use, and the electronics we depend on.

This pervasive role has put chemical stocks in the spotlight.

Despite recent market dips, investors have seen solid gains over the past year. Now, as markets look uncertain, equity fund managers are turning to a more cautious approach, and chemical stocks are among their top picks.

In this article, we'll explore five chemical stocks that have consistently attracted mutual fund interest. These stocks have shown a steady increase in mutual fund holdings for four consecutive quarters since September 2023.

#1 SRF

First on the list is SRF.

SRF manufactures and sells fluorochemicals and speciality chemicals such as refrigerants, pharma propellants, and industrial chemicals.

It has a wide product portfolio, with leadership in most of its products. The company's products are mainly used in agriculture and pharmaceutical industries.

Apart from chemicals, the company also manufactures packaging films, fabrics such as belting fabrics, tyre cord fabrics, polyester industrial yarn, and coated and laminated fabrics.

Data from the exchanges reveals that mutual funds have shown a bullish stance on SRF since the September 2023 quarter, steadily increasing their stake from 7.4% to 9.8% by September 2024.

Quarter Ending	Sep-23	Dec-23	Mar-24	Jun-24	Sep-24
Mutual Fund Stake (%)	7.4	7.8	8.3	8.4	9.8

Source: Equitymaster

Below is a list of the top five mutual fund holders in SRF as of September 2024.

Funds	Total Shares Held
Kotak Flexicap Fund	6,300,000
Kotak Emerging Equity Scheme Growth	2,196,455
Mirae Asset Large & Midcap Fund Growth	1,941,654
Kotak Equity Opportunities Fund Growth	1,498,607
HDFC Top 100 Fund Growth	1,388,025

Source: Equitymaster

This can be because SRF is a market leader in the fluorochemicals business, with a dominant presence in fluorination chemistry and non-fluorinated chemistries.

It is also among the top five global manufacturers of key fluorochemical products, and one of the few global manufacturers of pharma grade 134a/P - propellant in metered dose inhalers.

Apart from this, it has a 40% market share in India's nylon tyre cord market and is the 5th largest player globally.

It is also the second-largest manufacturer of conveyor belting fabrics in the world.

Over the past five years, SRF's financials have shown steady growth, with revenue increasing by 13.1% and 17.7%, respectively.

SRF aims to invest Rs 150 bn in capex for the next four years to ramp up its production capacities.

Out of this Rs 120 bn will be invested in the chemicals business, and the rest will be utilized for its packaging film and textile businesses.

Apart from this, the company is building a captive power plant to control its power costs and improve profitability.

SRF is also actively developing new products to expand its product portfolio. All these efforts are expected to drive growth in the medium term.

For more details, see the SRF company fact sheet and quarterly results.

#2 Deepak Nitrite

Next on the list is Deepak Nitrite.

Deepak Nitrite is engaged in manufacturing chemical intermediaries, fine and speciality chemicals, products, and phenolics.

It has a wide product portfolio of over 100 products, with leadership in the majority of its products.

The company's products have several use cases, such as in colourants, petrochemicals, rubbers, agrochemicals, pharmaceuticals, paints, adhesives, personal care, thinners, ply, laminates, and foundry.

Deepak Nitrite mainly supplies the domestic market but also exports to Europe, the USA, Asia, and the Middle East.

It has a client base of over 1,000 customers, and some of them include Bayer Corp, Unilever, L'Oreal, Nirma, Reliance Industries, and Lubrizol.

Mutual fund interest in Deepak Nitrite has remained strong since the September 2023 quarter.

Quarter Ending	Sep-23	Dec-23	Mar-24	Jun-24	Sep-24
Mutual Fund Stake (%)	8.6	8.7	9.0	10.4	11.4

Source: Equitymaster

In September 2024, Kotak Emerging Equity Scheme Fund, one of its top holder bought 544,336 shares of the company, taking its total share to 2,308,977, up from 1,764,641 shares in August 2024.

Below is a list of the top five mutual fund holders in Deepak Nitrite as of September 2024.

Funds	Total Shares Held
Kotak Emerging Equity Scheme Growth	2,308,977
Motilal Oswal Midcap Regular Growth	1,450,000
Franklin India Smaller Companies Fund	1,387,967
Franklin India Prima Fund	1,100,123
Nippon India Small Cap	1,000,000

Source: Equitymaster

This can be because Deepak Nitrite has a 75% market share in sodium nitrite and nitrotoluenes in India. It also has over 50% market share in phenol and acetone.

It's among the top three global players for xylidines, cumidines, and oximes.

Deepak Nitrite is a debt-free company as the company prepaid all its debt obligations in the financial year 2023.

The company has been actively working on deleveraging its books for the last five years and has successfully managed to do so by the financial year 2023.

During the last five years, it hasn't compromised on capex investments despite concentrating on repaying its debt.

Deepak Nitrite has acquired land parcels across India with a capital outlay of Rs 14.1 bn to set up manufacturing facilities to ramp up its capacities.

It has also committed to invest Rs 40 bn in new products based on environment-friendly technologies and brownfield expansion of existing products.

The company is also planning to add high-value solvents and has set aside Rs 70 bn for it.

In the last five years, Deepak Nitrite's revenue and net profit have grown at a CAGR of 23.3% and 36.1%, respectively.

At present, the company is aiming to ramp up its production capacities to cater to the growing needs of its clients.

For this, it has invested over Rs 14 bn to acquire land parcels. Moreover, it is planning to invest Rs 40 bn to develop new products and acquire companies that are manufacturing some of its existing products.

For more details, see the Deepak Nitrite company fact sheet and quarterly results.

#3 Godrej Industries

Next on the list is Godrej Industries.

Godrej Industries is a holding company, a part of the Godrej Group, an Indian multinational conglomerate.

The company manufactures and sells oleochemical products, such as fatty alcohols, esters, waxes, refined glycerin, and sodium lauryl sulphate.

Apart from this, the company produces and sells compound feeds for cattle, poultry, shrimp, and fish.

Mutual fund interest in Godrej Industries has remained strong since the September 2023 quarter.

Quarter Ending	Sep-23	Dec-23	Mar-24	Jun-24	Sep-24
Mutual Fund Stake (%)	0.5	0.8	2.7	2.9	3.4

Source: Equitymaster

In August 2024, DSP Top Equity Fund bought the counter with 120,371 shares.

Below is a list of the top five mutual fund holders in Godrej Industries as of September 2024.

Funds	Total Shares Held
Tata SmallCap Fund	3,020,663
Tata Large & Mid Cap Fund	1,880,566
DSP ELSS Tax Saver Fund	1,160,825
DSP Equity Opportunities	1,096,439
Mahindra Manulife Small Cap Fund	1,046,491

Source: Equitymaster

This can be because Godrej Industries has invested in building its research and development capabilities to grow its value-added products portfolio.

In July 2024, Godrej Industries acquired the Ethoxylation Unit II of Shree Vallabh Chemicals in Gujarat to strengthen its position in oleochemicals, surfactants, specialities and biotech.

Coming to the financial performance of Godrej Industries from 2020 to 2024, the company has experienced mixed growth. Sales have increased at a 5-year compounded annual growth rate (CAGR) of 8.9%, and net profits have fallen by 8%.

Going forward, Godrej Industries is committed to building a greener India. The company has adopted energy-efficient equipment and processes to minimize energy consumption.

For more details, see the Godrej Industries company fact sheet and quarterly results.

#4 Sumitomo Chemical India

Next on the list is Sumitomo Chemical India.

Sumitomo Chemical India Ltd. (SCIL) is one of the leading players in the industry which has a balanced portfolio of technical as well as formulation products along with backward integration for some products.

The company is known for domestic marketing of proprietary products of its Japanese parent -Sumitomo Chemical Company Limited in agrochemicals, animal nutrition, and environmental health business segments.

Mutual fund interest in Sumitomo Chemical has remained strong since the September 2023 quarter.

Quarter Ending	Sep-23	Dec-23	Mar-24	Jun-24	Sep-24
Mutual Fund Stake (%)	3.8	3.8	4.3	5	5.3

Source: Equitymaster

In September 2024, Nippon India Nifty Smallcap 250 Index bought the counter with 115,184 shares.

Below is a list of the top five mutual fund holders in Sumitomo Chemical as of September 2024.

Funds	Total Shares Held
HSBC Smallcap Fund Regular Growth	4,672,221
360 One Focused Equity Fund	3,912,446
PGIM India Midcap Opportunities Fund	1,578,298
Axis Growth Opportunities Fund	1,241,181
Axis Midcap Fund	1,174,826

Source: Equitymaster

This constant buying can be due to the integration of Excel Crop Care Limited. The company now has a strong portfolio of generics in addition to speciality products and a strong combined marketing network.

With this integration, the company has moved up several notches in the pecking order of the Indian crop protection industry. SCIL has also marked its presence in Africa and several other geographies.

Coming to the financial performance of Sumitomo Chemical India from 2020 to 2024,sales have increased at a 5-year compounded annual growth rate (CAGR) of 5% and net profits have risen by 17%.

To turn the fortunes around, the management is exploring partnerships with other agrochemical players and potential expansion into new product segments.

It is also planning a capex of Rs 2.5-3 bn for the next project, to be financed from internal accruals.

The management is exploring opportunities in the chemicals sector with preliminary discussions initiated by SCC Japan, assuring its commitment to exploring new business avenues and leveraging capabilities for future growth and diversification.

For more details, see the Sumitomo Chemical India company fact sheet and quarterly results.

#5 Jubilant Ingrevia

Last on the list is Jubilant Ingrevia.

Jubilant Ingrevia, is a global integrated life science products and innovative solutions provider serving, pharmaceutical, nutrition, agrochemical, consumer and industrial customers.

The company offers a broad portfolio of high-quality ingredients that find application in a wide range of industries. Its portfolio also extends to custom development and manufacturing for pharmaceutical and agrochemical customers on an exclusive basis.

Mutual fund interest in Jubilant Ingrevia has remained strong since the September 2023 quarter.

Quarter Ending	Sep-23	Dec-23	Mar-24	Jun-24	Sep-24
Mutual Fund Stake (%)	8.1	9.1	10.2	10.6	12.7

Source: Equitymaster

In September 2024, Franklin Smaller companies bought 1,000,000 shares.

Below is a list of the top five mutual fund holders in Jubilant Ingrevia as of September 2024.

Funds	Total Shares Held
DSP Smallcap Fund Regular Plan	7,937,996
DSP Midcap Fund	4,469,774
Edelweiss Smallcap Fund	1,305,498
DSP Top 100 Equity Fund	1,082,115
DSP India T.I.G.E.R Fund	1,028,842

Source: Equitymaster

This can be because the company is a global leader in bio-pyridine and bio-beta, Vitamin B4 manufacturing.

Jubilant Ingrevia is also a top-ranking chemical company in ESG initiatives, such as the S&P DJSI, TFS, Ecovadis, CDP Climate Change program, and Responsible Care certification.

The company is focused on green energy and has set ambitious targets to achieve above 30% greening in the coming years.

In the last three years, Jubilant Ingrevia's revenue and net profit have grown at a CAGR of 82.2% and 20%, respectively.

Going forward, Jubilant Ingrevia expects to finish FY25 with improvements in its overall business, particularly within the speciality chemicals and nutrition and health solutions businesses.

Its main focus remains on customer-centricity, utilising the newly commissioned plants, enhancing operational efficiency leading to further improvement in margins.

For more details, see the Jubilant Ingrevia company fact sheet and quarterly results.

Conclusion

Investing in chemical stocks that mutual funds are consistently buying could be a strategic move for those looking to capitalize on the growth potential of the sector.

Mutual funds, managed by experienced professionals, tend to focus on companies with strong growth prospects and innovation-driven strategies.

The Indian chemical industry is projected to grow at a compound annual growth rate (CAGR) of 11-12% by 2027, with the speciality chemicals sector expected to expand at a CAGR of 12% from 2020 to 2025.

This growth is driven by increased domestic and international demand, advancements in chemical technology, and a strategic shift towards high-value chemicals.

Disruptions in the global supply chain, particularly due to geopolitical tensions and strict regulations in China, have created a favourable environment for Indian companies.

As a result, the Indian chemical industry is seeing increased demand, especially as it looks beyond China for raw material sourcing.

With advancements in research and development and process engineering, India is positioning itself as a leader in the speciality chemicals market. These factors are set to further strengthen the global competitiveness of Indian manufacturers.

However, it is important to exercise caution. While mutual fund managers may have bought certain stocks for their portfolios early, it might not always be wise to invest in the same stocks at current levels, as their valuations may have already risen significantly.

Therefore, it is crucial to conduct thorough research and assess both the timing and price before making investment decisions.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...