This specialty chemicals stock has more than doubled in a month

The company reported a strong operational performance in the December quarter

Shares of the Dharamsi Morarji Chemical Company, on Tuesday, were locked in 10 per cent upper circuit for the second straight day at Rs 400.25, also its new high. The trading volumes on the counter doubled with 116,000 equity shares changing hands on the BSE till 12:48 pm; against an average 55,000 shares traded daily in the past two weeks.

The stock of the specialty chemicals company has rallied 21 per cent in the past two trading days. The company's market price has more-than-doubled, up 111 per cent, since February 8, after it reported a strong operational performance in the December quarter (Q3FY21).

The company recorded strong EBITDA (earnings before interest, taxes, depreciation, and amortization) margins of 18.88 per cent in this quarter, against 14.97 per cent in Q3FY20. The strong margins were aided by a combination of soft input prices and higher finished product prices during the quarter.

The company's revenues in Q3FY21 increased by 16.95 per cent to Rs 47.33 crore as compared to Rs 40.47 crore in Q3FY20. It recorded a strong overall performance despite a planned maintenance shutdown of 35 days during the quarter. The company also witnessed strong demand from the exports market.

The company said it is witnessing a recovery in volumes in both bulk as well as specialty chemicals in the domestic markets as all industries are now fully operational. It has a strong order book visibility and expects the momentum to continue going forward.

The export market has done relatively well since the outbreak of the pandemic. Exports contributed around 31 per cent of the total sales in Q3FY21 as compared to 34 per cent in Q2FY21. The industries in the export market have been fully operational and the company remains cautiously optimistic in the export business, it said.

Diversification of supply chains out of China coupled with stricter environmental norms is changing the structure of Chinese chemical industry. These factors are causing uncertainty among international players that source chemicals from China. This could create an opportunity for the Indian chemical players in certain value chains and segments. Steadily shepherding the industry towards higher environmental standards, China’s stricter norms are disrupting some parts of the chemical value chain, Dharamsi Morarji Chemical said in 2019-20 annual report.