Chemcon Speciality Chemicals sees stellar listing; should investors book profits or buy more?

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26 Aug, 2025 12:21

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Chemcon Speciality Chemicals listed with a massive 115 percent premium at Rs 731, but as the day progressed it witnessed some profit-booking at higher levels and fell below Rs 600 levels intraday despite strong market trend on October 1.

It was trading at Rs 585, up 72 percent over issue price of Rs 340, but down 20 percent from opening price on the BSE. As there is an upper/lower circuit limit of 20 percent on day one, the stock cannot fall or increase beyond the said limit set by exchanges.

The listing was on expected lines given the company being leading manufacturer globally of the pharmaceutical chemicals and oilwell completion chemicals.

But should investors hold shares received in allotment, buy additional shares or book profits now? Majority of experts advised booking profits and if possible, one can hold partial shares for medium to long-term given the expected growth in coming years.

"We would suggest allotted investors book hefty listing premium profits," Prashanth Tapse, AVP Research at Mehta Equities told Moneycontrol.

"On valuations parse at upper price band (Rs 340), we believe post listing the company would trade in the range of PE 40x from 25x (IPO offer), which makes sense for IPO allotted investors to book profits, with limited upside post listing around Rs 730 levels," he explained.

Chemcon is the speciality chemicals manufacturer of pharma chemicals (HMDS, CMIC) and oilwell completion chemicals (inorganic bromides). It is the only manufacturer of HMDS in India and the third-largest manufacturer of HMDS worldwide in terms of production with an opportunity to grow at CAGR of 15-20 percent over FY19-FY23.

It is also the largest player of CMIC in India and the second-largest worldwide. Additionally, Chemcon is the only manufacturer of zinc bromide and the largest of calcium bromide in India.

Astha Jain, Senior Research Analyst, Hem Securities also advised investors book profits on partial holding and keep remaining holding for long term purpose as the company has shown consistent financial performance with a strong financial position. "Also, the specialty chemicals industry in which the company operate has high entry barriers."

Manali Bhatia, Head-Research at Rudra Shares & Stock Brokers feels the stock is a definite "hold" given its new product launches (CBC & 2,5DHT) and expansion plans through a total volumetric reactor capacity of 251.00KL at existing manufacturing facility Manjusar, Vadodara. This would significantly increase the capacity by 60 percent and also enable to benefit from economies of scale in the next few years, she said.

"Being a sole producer of HMDC & CMIC products it enjoys a leadership position. Their products have a huge demand not only in India, but also have an opportunity for growth in exports which would drive revenue growth in the coming years. Further, high entry barriers in the specialty chemical industry could comfort the margins and profits," she added.

Chemcon's revenue increased at a 29 percent CAGR during FY18-FY20, EBITDA 25 percent and profit 36 percent, driven by volume and price growth.

Its EBITDA margin is strong at 26.8 percent in FY20 given the leadership position and highly complex nature of the products.

If investors wish to add on Chemcon on listing day, then should better wait and watch for better pricing post listing, Prashanth Tapse advised.

Outlook

Tapse believes Chemcon is well-positioned to substitute the imports from China and has an opportunity to grow and double its revenue as well as profits in 3-4 years.

"If we look at specialized chemicals as a sector it is been re-rated in last 3-6 month due to ongoing saga with Chinese but the concern remains on procurement of raw materials from China which accounts around 20 percent to its total expenditure," he said.

He advised long term investors to hold with rationales such as worldwide leadership position in HMDS & CMIC, capacity additions with expanding earnings going forward, healthy improvement in margins and improving outlook for the sector.

Well, considering all the parameters high-risk investors can hold for 20 percent return on investment (RoI) YoY, he said.

Manali Bhatia maintained a positive outlook on the stock as the company has secured environmental clearance for manufacturing an aggregate of around 44 products (including 9 current products) & increasing the quantity of products produced from 2,511MT per month to 10,611 MT per month from the Government of Gujarat, is a big positive.

Chemcon has long-standing relationships with customers having strong customer base, healthy return ratios- ROCE & ROE at 37.92 percent & 34.23 percent for FY20, favourable debt-equity ratio and stable PAT & EBITDA margins.

At current valuations at a P/E of 22.12x, lower than industry average makes stock attractive to invest in for the long term, she feels.

Chemcon Speciality Chemicals raised Rs 318 crore through public issue, of which the company received Rs 165 crore via fresh issue and the rest Rs 153 crore will go to promoters. The issue was subscribed 149.33 times during September 21-23.

It will utilise fresh issue proceeds towards the expansion of manufacturing facility, working capital requirements, and general corporate purposes.

Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.