Chemical companies like Aarti, Jubilant, and Gujarat Fluoro are expected to recover with stronger earnings growth due to their capex investments. The sector has bottomed out, and emerging sectors like EV batteries and consumable industries show growth potential. Companies focusing on agrochemicals may still see one or two quarters of weakness because global agrochemical de-stocking is still continuing.
Fitch Ratings predicts that the 5G capex investments of Reliance Jio and Bharti Airtel will taper to 35% of revenue in FY24. While the sector’s average Ebitda margin is expected to expand, Fitch cautions that the free cash flow generation will remain limited due to high 5G investments. The competitive landscape is also expected to be dominated by Jio and Airtel, with the two operators projected to add millions of subscribers in 2024. However, Fitch highlights the risks of a slow 5G adoption and the need for an evolved device ecosystem in the Indian market.
