Morgan Stanley has upgraded the ratings of two Indian chemical companies, Pidilite Industries Ltd. and Navin Fluorine International, citing their exposure to the agrochemicals sector. The brokerage firm believes that the Indian chemical industry will experience a constructive volume-growth cycle led by agrochemicals in the financial year 2026. This is expected to support stronger asset runs, operating leverage-led margin tailwinds, and faster capacity monetization, despite demand challenges and weak pricing.
As a result, Morgan Stanley has increased the target price for Pidilite Industries to Rs 5,000 from Rs 3,524, implying a 65% upside from current levels. For Navin Fluorine, the target price has been raised to Rs 4,160 from Rs 3,242, although this implies an 8.4% downside from the current price. The expected growth in the agrochemicals sector is driven by a fresh round of global crop protection volume growth in 2026 and 2027, which will have multiple implications for Indian chemical companies.
Agrochemicals account for 30-35% of revenue across India’s specialty chemical portfolios, with exports making up around half of revenues. Indian chemical producers are well-positioned to benefit from improving legacy offtakes and new product scale-ups. Morgan Stanley estimates that the sector will experience double-digit volume growth, leading to a return to 20% compound annual growth rate (CAGR) earnings growth profiles. Additionally, the brokerage firm expects a 200 basis points rise in return on capital employed.
However, there are key risks associated with the Indian chemical industry, including the possibility that volume growth may remain elusive, compounding pricing pressures and delaying monetization and returns expansion. Overall, Morgan Stanley’s upgrade of Pidilite Industries and Navin Fluorine reflects its positive outlook on the Indian chemical industry, driven by the growth potential of the agrochemicals sector. The brokerage firm’s predictions suggest that the sector is poised for a strong growth cycle, driven by increasing demand for agrochemicals and improving operating leverage.