Morgan Stanley turns constructive on chemicals, upgrades PI Industries, Navin Fluorine

Morgan Stanley prefers Navin Fluorine over SRF in the chemicals space.

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Chemical players PI Industries Ltd and Navin Fluorine Ltd bagged a rating upgrade from international brokerage Morgan Stanley, as the outlook for the chemicals segment becomes more optimisitc.

Morgan Stanley has upgraded PI Industries to 'Over-weight' from its earlier 'Equal-weight' rating, while significantly raising the stock’s target price by 42 percent, from Rs 3,524 to Rs 5,000. The brokerage cited expectations of a more favourable, volume-driven agri-chemical cycle in 2026, which could improve asset utilisation and drive margin gains through operating leverage.

Navin Fluorine was also upgraded, moving to 'Equal-weight' from 'Under-weight', with its target price revised upward by 28 percent to Rs 4,160 from Rs 3,242. The foreign brokerage noted that while FY25 was marked by subdued demand and pricing pressures, the outlook for the sector appears to be turning more constructive.

However, Morgan Stanley added a note of caution, saying that current valuations warrant a selective approach when choosing stocks in the space.

At 12.20 pm, shares of PI Industries rallied 4.7 percent to Rs 4,158.8, while Navin Fluorine shares were down 1.6 percent at Rs 4,471 on the NSE.

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“PI has the highest exposure to agrochemicals in our coverage,” Morgan Stanley said. The brokerage expects PI Industries to benefit from a three-pronged volume increase across domestic markets, exports, and new molecules. It estimates that by FY28, new molecules and biologicals will each contribute one-third to PI’s custom synthesis exports and domestic portfolios.

Morgan Stanley believes valuation multiples could re-rate 20 percent higher, returning to levels last seen between 2022 and the first half of FY24. This potential upside is linked to increased investor confidence in PI’s ability to manage competitive pressures in its legacy product portfolio.

For Navin Fluorine, the brokerage has raised the valuation multiple for its contract manufacturing and high-performance segments to 25x (up from 20–22x), citing strong operational performance, an improved margin profile, and a robust order book pipeline.

Morgan Stanley also noted a relative preference for Navin Fluorine over SRF, attributing it to Navin’s more diversified exposure across contract manufacturing and advanced materials.

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