India vs China: Sectors investors must track for possible manufacturing gains

The opportunity for Indian manufacturers are humongous if there is a sizable shift in opportunities from China to India. A look at the India-USA trade gives some clue. A good portion of India's current exports to the USA consist of apparel, pharma, chemicals, vehicles and furniture. However, except for a few sectors such as pharma, fish/sea creatures and carpets, exports from China are several times more than that of India.

There are multiple sectoral opportunities which investors can keep an eye on:

Chemicals

Sub-segments such as aromatic chemicals, fluorochemicals dyes & pigments and contract research and manufacturing services (CRAMS) /Contract manufacturing are expected to continue to benefit from this trend. In recent times business inquiries from developed markets have increased with the intention of diversification of supply chain. Time and again, such opportunities have been called out by the likes of NOCIL, Aarti industries and Atul industries. One of the ways this opportunity can express is with multi-year dedicated deals as exhibited by Aarti Industries and Navin Fluorine.

Also Read: How dependent is India on China? Here is what trade data reveals

Agrochemicals

UPL, PI Industries, Bharat Rasayan, Excel Industries, Insecticides India are the names that are positioned to benefit from the shift and would be worth watching out for. PI Industries indicated that it has witnessed big order wins and a significant surge in enquiries and is ready for high growth in the CSM (Custom Synthesis Manufacturing) segment. UPL, another major player in this space, sees this as an opportunity to seize market share and the management believes that there is opportunity for UPL to emerge as an alternative supply source.

Pharma/APIs

On the API space, companies which appear to be well positioned given the wide portfolio are Laurus Labs, Solara Active, Ipca labs and Divi's Lab. Divi's Lab has recently completed Rs 1700 crore expansion plan and as 60 percent of business comes from CRAMS. It can further enhance its position as a global sourcing partner. Further, Fermenta Biotech which has a significant market share in the Vitamin D3 API can benefit as it competes with Chinese players in the global market.

In the formulation space, companies such as Cipla, Dr Reddy's, Cadila Health having a reasonable export exposure particularly in the USA market and demands attention. Further, companies better positioned for complex generics such Biocon, Lupin and Dr Reddy's should also be kept on a close watch.

Durables

Traction for contract manufacturers is a likely fall out of reduced import dependency. Last year, contract manufacturer Dixon Technologies had indicated the company is looking to scale up its presence in the export market through the lighting and mobiles segment. Likewise, AC manufacturer Amber Enterprises could also benefit from the market opportunities thrown across by the pandemic.

Also Read: The reset of globalisation: How big is it an opportunity for India Inc?

Auto component makers

Many companies associated with making components are expected to gain. In the Electricals segment, Nippon Electricals is a key player. In suspension & braking part, Jamna Auto, Gabriel India, Munjal Showa are the companies which are expected to benefit and in the cooling systems category, Subros is expected to hog the limelight.

Capital goods

MNCs with the technological advantage and strong parentage in global markets, such as Cummins, ABB and Siemens with reasonable export exposure to benefit.

Original Source: https://www.moneycontrol.com/news/business/companies/india-vs-china-sectors-investors-must-track-for-possible-manufacturing-gains-5347011.html