Morgan Stanley has maintained a cautious stance on the Indian chemical sector, highlighting that a return to normalcy in FY26 is unlikely to be linear. With 40% of revenue exposure to exports, the firm expects Indian chemical companies to face dynamic customer behavior, shorter-duration purchases, and sustained competitive pressure.
Incumbent players are likely to run their assets harder in FY26 as new projects ramp up. Fluorochemical manufacturers are also expected to increase refrigerant gas volumes over the next three years to maximize quota allocations. However, Morgan Stanley predicts pricing inflection will remain capped.
Stock-specific ratings
- Deepak Nitrite: Maintains ‘Overweight’ rating but cuts the target price to ₹2,480 from ₹3,000.
- PI Industries: Maintains ‘Equal Weight’ with a revised target price of ₹3,524, down from ₹4,310.
- SRF: Maintains ‘Underweight’ but raises the target price to ₹1,870 from ₹1,650.
- Navin Fluorine: Remains ‘Underweight,’ but the target price is increased to ₹3,242 from ₹2,700.
- Tata Chemicals: Maintains ‘Underweight’ with a target price cut to ₹780 from ₹879.
Morgan Stanley’s analysis suggests that while certain players are adapting well to shifting industry dynamics, the overall sector faces challenges from pricing pressures, competitive intensity, and changing customer behaviors.
