Chemicals & Fertilizers: Stock Selection is Key
The chemicals space has been abuzz, especially after Navin Fluorine surged 16% on strong quarterly numbers. Khemka believes this strength reflects solid momentum across key business segments.
“If we segregate, there are various sub-segments. Navin Fluorine came out with a strong performance across all segments. Strong growth continues in the CDMO business and in specialty chemicals,” he said.
He added that while Navin Fluorine stands out with robust results, peers like SRF showed some softness.
“If one were to see the SRF numbers, that was a bit disappointing in terms of the overall growth, so a bit of mixed cues coming in from both the players. So clearly, Navin has an upper edge,” he explained.However, Khemka cautioned that valuations in the sector are elevated, and investors must be selective.“We had seen a run-up, especially if you look at R22 chemical prices globally — they are coming off from the highs, and that is why some of these stock prices also reflected that kind of weakness. But nonetheless, you have to be stock selective in that space,” he noted.
On fertilizers, Khemka pointed out that government policy support and improving global supply chains are key positives. He remains upbeat on Coromandel International and PI Industries.
“Coromandel is backward integrating which will improve margins and capacity expansion, plus something like PI Industries, which is an agri-inputs company — these two stocks within the speciality chemicals and agrochemical segment are something that we like,” he said.
SBI: Expect a Steady Quarter
When asked about State Bank of India’s (SBI) upcoming results, Khemka sounded confident about the lender’s performance.
“If you look at some of the larger banking names, they have come out with strong numbers, especially the likes of ICICI. ICICI and SBI are the two banks in the larger banking space that have consistently reported strong numbers,” he observed.
He added that improvement in margins and asset quality continue to underpin their outlook.
“Asset quality for both remains pretty strong and SBI has shown one of the highest coverage ratios. We expect a steady quarter from SBI as well. We have a positive view on SBI with a buy rating,” Khemka said.
Metals: Turning the Corner
The metals sector, which has seen strong price action lately, is also finding renewed optimism from global cues.
“Definitely the outlook for metals is turning positive across the street. We recently upgraded Tata Steel from a neutral to buy,” Khemka revealed.
According to him, Tata Steel stands to benefit from improving realizations, operational efficiencies, and robust domestic demand.
“Tata Steel tends to gain from the improving steel price realization, increased operating efficiencies, and a strong domestic demand environment. Plus, safeguard duties implemented for the domestic industry should also support the business,” he explained.
Global developments are adding to the optimism.
“There is a positive read-through from what the US-China talks are happening… at least the rhetoric will come down, whether there is a deal or not, but that should aid and be positive for base metal prices,” Khemka said.
He further highlighted the company’s financial prudence.
“Tata Steel has very strong operating cash flows. They are looking at expansion without increasing leverage, maintaining enough balance sheet discipline. That is leading us to giving an upgrade on Tata Steel to buy with a target price of ₹210,” he concluded.
