What is Driving the Rally in Specialty Chemical Companies

Specialty chemicals companies have been in the news for all the right reasons. Take a look at how 8 major specialty chemical companies in India performed over last 1 year.

_{Data Source: NSE}

Most of the major specialty chemical companies (excluded recent listings) have done very well in the recent past. The most recent trend was the phenomenal performance of specialty chemicals stocks on 26 July on hopes of solid first-quarter results.

What is so special about specialty chemicals?

Specialty chemical companies have been building scale over last few quarters. The environmental clampdown in China served the cause of Indian specialty chemical companies. The pandemic forced a lot of global consumers of specialty chemicals to shift some demand to India. That is the long-term story, which is evident in the above table. On 26 July, specialty chemical stocks rallied on Q1 expectations.

Most specialty chemicals players touched new highs on 26 July on strong earnings expectations for Q1. Chemical analysts are factoring in double-digit growth for specialty chemical companies in the Jun-21 quarter led by a spurt in demand and better pricing power. Specifically, the CRAMS portfolio of specialty chemical companies is expected to do exceedingly well. The only challenge is the higher input costs, which is likely to impact OPMs by 100-200 bps. However, analysts are confident that specialty chemical players can easily pass on these costs.