EUR 120.00 For Business Accounts Only

MOSL: Morning India (1/July/21): 1. Specialty Chemicals (Genie is out! Initiating coverage with a positive outlook on the space); 2. Vodafone Idea; 3. EcoScope (a. Current account sees another deficit in 4QFY21

MOrning India (1/July/21): 1. Specialty Chemicals (Genie is out! Initiating coverage with a positive outlook on the space); 2. Vodafone Idea; 3. EcoScope (a. Current account sees another deficit in 4QFY21; b. Taxes continue to see strong growth in May’21)

Today’s top research theme

Specialty Chemicals: Genie is out!; Initiating coverage with a positive outlook on the space

• We initiate coverage with a positive outlook on the Specialty Chemicals space. We assign a Buy rating to Deepak Nitrite (DN - our top pick), Vinati Organics (VO), Galaxy Surfactants (GALSURF), and NOCIL; a Neutral rating to Atul (ATLP), Alkyl Amines (AACL), Navin Fluorine (NFIL), and Fine Organic (FINEORG).
• Capex plans of INR39b over FY22-24E (similar to FY19-21) would result in 52% revenue growth by FY24E (from FY21 levels), making these companies exciting plays. We expect EBITDAM expansion to 25% by FY24E (from FY20/FY21 levels of 22.5%/24.3%).
• We expect our Coverage Universe to post an EBITDA/PBT CAGR of ~20%, with return ratios of 23-25% over FY22-24E (up from 22% in FY19/FY21).
• Our Coverage Universe consists of net debt-free companies (excluding DN and GALSURF, which are expected to turn net debt-free by FY23E) that plan to incur capex through internal accruals only. We expect total FCF generation of INR83b (v/s capex plans of INR39b) over FY22-24E.

Piping hot news

Finmin reimposes spending curbs on ministries, depts for Q2 of FY22

The finance ministry on Wednesday reimposed expenditure curbs on various central ministries and departments for the July-September quarter of the current financial year. Putting these ministries and departments into two categories, government feels that it is essential to regulate the expenditure plan for each bucket keeping in mind the cash position ahead of expected third wave. However, there will be no spending restrictions on Health, MSME and Rural Development.