Experts believe that China’s novel coronavirus pneumonia has brought opportunities to compete with China in the export of specialty chemical products through low labor costs.
For a long time, China has dominated the export market of special chemical products, and the current sales volume is about 2.7 times that of India.
However, factors such as capacity closures due to environmental degradation, rising labor costs and trade-related supply disruptions are threatening China, which is seen as an opportunity for India.
Over the past few years, India’s chemical industry has built world-class capabilities and has been moving rapidly up the value chain.
In the past few years, production has shifted from China to India due to increased costs and environmental problems in China.
Jyoti Roy, senior vice president and equity strategist of angel broking, predicts that after covid-19, global enterprises will diversify their supply chains away from China, and this trend will accelerate development. India’s chemical industry has unique advantages and can seize a large part of the opportunities.
Vinod Nair, head of research at geojit financial services, points out that in the past few years, India’s chemical industry has benefited greatly from the shift from China to India’s high procurement due to regulatory constraints on pollution, cost optimization and diversification.
According to krchoksey shares and securities, a brokerage firm, India has a strong base in the top three export sectors of specialty chemical products – agricultural chemicals (nearly 27% of India’s exports of specialty chemicals), dyes and pigments (nearly 19%), and intermediates of active pharmaceutical ingredients (about 18%).
In general, India’s exports of specialty chemical products in fiscal year 19 were worth US $23.8 billion, while China’s exports were worth US $173 billion, which shows that Indian specialty chemicals enterprises are facing huge opportunities.
“Our analysis shows that the roe / EBITDA margins of Indian professional brands are higher than those of their international counterparts (despite the low scale of operations), indicating that there is enough space for effective competition,” krchoksey said
The brokerage believes that the idle installed capacity of the chemicals segment can be used to improve production and meet the demand for increased demand in the short term without additional capital expenditure, i.e. positive cash flow.
Runjhun Jain, AVP analyst of Nirmal Bang’s equity research (retail), also believes that the current trend will make the Indian chemical industry the focus of attention, as global giants around the world are looking for second sources to reduce the risk of their business.
“Many companies in the industry have recently made capital expenditures to further improve their capabilities and reverse integration to reduce their dependence on Chinese resources,” Jain added
Deepak jasani, head of retail research at HDFC securities, said Indian companies needed to integrate backward and diversify their sources of raw materials.
“They need to grow outside of agriculture and pharmaceuticals, and invest in their own know-how, which can involve large capital expenditures and expenditures. Therefore, capital allocation policy will be the key.
Vice President – in view of the Haas sedani Anand Rathi stock Advisory stock and stockbroker, key factors for Indian chemical companies’ long-term growth include business in key markets, established communication channels with global large chemical companies, strong customer relationships, niche functions, integrated business (back and forward), focusing on product and process R & D. Most of India’s chemical enterprises have different proportions of such products.