Why this smallcap specialty chemicals stock zoomed 57% in 4 days? Details

Fairchem Organics shares rallied 12 per cent to Rs 1,307 on the BSE in Thursday's intra-day trade, extending its past three day's upward movement, in an otherwise weak market

Shares of Fairchem Organics (Fairchem) rallied 12 per cent to Rs 1,307 on the BSE in Thursday’s intra-day trade, extending its past three day’s upward movement, in an otherwise weak market. Thus far in the current week, in four days, the stock price of this smallcap specialty chemicals company has zoomed 57 per cent from Rs 832.40 on Friday, December 13.

 

At 11:39 AM, Fairchem was trading 10 per cent higher at Rs 1,274.25, as compared to the 1.06 per cent decline in the BSE Sensex. The stock had hit a 52-week high of Rs 1,552 on July 3.

 

 

On clarification on price movement, Fairchem today said there is no other information/announcement (including impending announcement) which in the company’s opinion needs to be disclosed/reported to the Stock Exchanges and which may have a bearing on the pricing behavior in company’s scrip.

 

On Tuesday, December 17, FIH Private Investments, the promoter of Fairchem, had acquired a 1.43 per cent stake in the company via open market purchase, according to disclosures made by the company to the stock exchanges.

 

FIH Private Investments did not hold any shares of the company at the end of the September quarter, the shareholding pattern data on the exchanges showed. However, FIH Mauritius Investments (Promoter) had a 52.83 per cent holding in Fairchem, data showed.

 

Fairchem is engaged in the business of manufacturing of oleo chemicals and nutraceuticals. The company’s key oleo chemical products include Dimer acid, Linoleic acid, Palmitic acid, Monomer acid, Isostearic acid and nutraceutical products, including mixed Tocopherols and Sterol concentrate.

 

The company is the only Isostearic Acid manufacturer in India which exports the said product to different countries, in Europe, South America and Southeast Asia, apart from the US. The company said it is set to export this product to a couple of more countries shortly.

 

Pharmaceutical and personal care is the largest application market for oleo chemicals accounting for a majority of the share. Growing biochemical product demand in various consumer applications such as personal care, detergents, and food & beverages, is expected to remain a key factor driving growth, according to the company.

 

The global oleo chemicals market is expected to reach $65.38 billion by 2032. The global oleo chemicals market size was valued at $40.37 billion in 2024, and it is expected to grow at a compound annual growth rate (CAGR) of 6.3 per cent from 2024 to 2032.

 

Asia Pacific is the leading consumer of oleo chemicals. The region is also expected to witness the fastest growth over the next few years owing to abundant raw material supply and significant developments in the application markets, the company said.

 

India's oleo chemicals market has been segmented into five categories namely - fatty acids, fatty alcohols, glycerin, fatty acid methyl esters and fatty amines. Robust growth in India oleo chemicals market can be attributed to the increasing demand for naturally derived raw materials from the paints and soaps industries. 

 

Fatty acids control a lion’s share in the Indian oleo chemicals market on account of a large requirement for distilled fatty acids and polyunsaturated acids, which are essential in the production of soaps, personal care products, detergents, lubricants, surfactants, etc.

 

However, looking ahead, the company expects a subdued performance during Q3FY25 (October-December 2024), driven by the recent 22 per cent hike in basic custom duty on certain types of crude and refined vegetable oils, effective September 14, 2024. This increase has resulted in higher raw material costs for Dimer acid production. 

 

The company operates in a competitive landscape, with Chinese imports of Dimer Acid not subject to the same custom duty hike. As a result, the company's pricing flixebility is limited, which may impact its profitability.

 

Consequently, the financial projections stated above are also subject to revision, as the company's profitability is expected to remain under pressure until the competitive landscape improves, Fairchem said in an investor presentation.