Alpha Ideas 20-20: This Is Solidarity Advisors’ Manish Gupta’s Favourite Stock Pick
But the stock has a heavy China influence, both positive and negative.
Solidarity Advisors Pvt. Ltd.’s Manish Gupta bets on Neogen Chemicals Ltd. as the maker of bromine and lithium-based derivatives is expected to benefit from lower output in China, one of the world’s largest producers of the chemical element.
“China bromine sources have poor concentration and production has reduced significantly over the past few years,” Gupta, the founder and chief investment officer at the investment advisory, said on the sidelines of Alpha Ideas 20-20 event in Mumbai. “Neogen Chemicals being the market leader in India and fifth largest in the world will benefit from this immensely.”
Neogen Chemicals is now aiming at shifting to higher-margin downstream business (advanced chemistry products/services), according to Gupta. The specialty chemical maker’s earnings per share, he said, is expected to grow at an annualised rate of 20-40 percent in the next five years on the back of rising share of value-added products in its portfolio and tax benefits from its upcoming greenfield manufacturing unit in Dahej, Gujarat.
Potential Risks
- If China discovers new sources of bromine, irrational pricing to retain market share can be a risk.
- High tariffs against India due to a trade war could impact cost competitiveness.
- Environment-related risks.
- Low free float will amplify any execution risks on stock price.
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Solidarity Advisors is a SEBI-registered investment management firm.