Recommendation from Chemicals sector

This column gives you scrip chosen by the research team during the fortnight that is fundamentally strong and expected to give good capital appreciation over a time period of 1 year.[EasyDNNnews:PaidContentStart]

Privi Speciality Chemicals Ltd : LEADER WITH STRONG GROWTH SCENT

HERE IS WHY
✓  Diversified Global Clientele
✓  Stable Demand Base
✓  Attractive Long-term Targets

The global chemicals market is valued at around USD 4.7 trillion, making it one of the largest industrial sectors worldwide. India accounts for only about 4.3 per cent of this market, ranking fifth globally. Within this, speciality chemicals contribute roughly USD 36 billion or 18 per cent of the total and are expanding at a brisk 12–16 per cent CAGR, outpacing many other industrial verticals. A key area within speciality chemicals is the flavours and fragrances (F&F) segment. The global F&F market is estimated to be worth USD 30.5 billion in 2025 and is projected to reach USD 48.9 billion by 2035, translating into a 4.9 per cent CAGR over the period. The domestic aroma chemical market, which supplies key inputs for fragrance manufacturing, is also expanding in line with rising fragrance demand. Globally, the aroma chemicals market is expected to grow from USD 6.55 billion in 2025 to USD 8.82 billion by 2033, a 7.7 per cent CAGR.

One such company operating in this space is Privi Speciality Chemicals Ltd (Privi), which we are recommending in this issue of Choice Scrip. Privi is among India’s leading manufacturers, suppliers and exporters of aroma and fragrance chemicals. Privi serves all of the world’s top 10 fragrance companies, which together control nearly two-thirds of the global fragrance market.

In Q1FY26, on a consolidated basis, Privi reported revenue of ₹559 crore, up 20.47 per cent YoY compared with ₹464 crore in the same quarter last year. Net profit rose 87.10 per cent YoY to ₹58 crore, from ₹31 crore a year ago. For FY25, the company’s revenue crossed the ₹2,000 crore milestone for the first time, reaching ₹2,101 crore, a 19.92 per cent increase over FY24. Privi’s revenue mix comprised about 30 per cent from India, 19.1 per cent from North America and 50.9 per cent from the rest of the world.

Approximately 70 per cent of Privi’s business is contracted, ensuring steady demand. Its products are core ‘N-12 FMCG products’, which face minimal impact from economic cycles as they are used in everyday consumer items. The company is backward integrated for about 70 per cent of its products, providing a cost advantage and supporting margin stability. Privi has announced a scheme of amalgamation involving Privi Fine Sciences, Privi Biotechnologies and Privi Speciality Chemicals to simplify the group structure, enhance operational efficiency and unlock new growth opportunities. Management has set a target of ₹5,000 crore revenue and ₹1,000 crore EBITDA over the next 3–5 years. To support this goal, an overall capex of about ₹1,100 crore is planned, with Phase 1 involving ₹280–300 crore. Phase 1 of capacity expansion is partly complete and will start contributing from Q2FY26, with full completion expected by Q4FY26, positioning the company for further growth in FY27.

Installed capacity is slated to increase from 48,000 tonnes to 54,000 tonnes in the near term. Debottlenecking and automation initiatives are expected to enhance volumes and margins of the company. Management is also focusing on improving asset utilisation and reducing net working capital days from around 140 to 120–125 days.

On the valuation front, the company’s shares are trading at a PE of 42.2x, compared with the industry average of 33.4x and a three-year median PE of 59.8x. Sales have grown at 14.4 per cent CAGR over the past three years, while profit has grown at 25.8 per cent CAGR. The company has reported a ROCE of 16.4 per cent, ROE of 18.4 per cent, a debt-to-equity ratio of 1.04, and a PEG ratio of 1.64. Considering these factors, we recommend a BUY.

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