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As the markets trade very close to record highs, finding value always becomes a challenge.

However, here are three stocks from the chemical sector that continue to remain undervalued using specific criteria. These stocks have been selected using data from the Equitymaster screener.

To identify undervalued options, specific criteria were applied, including a debt-to-equity ratio of 0 and a return on equity of 9% or more and a return on capital employed of more than 12%.

It's crucial to remember that valuation is a subjective concept; what one investor considers to be undervalued might not be the same for another. There could also be various parameters to examine undervaluation.

Please note, this editorial is for informational purposes only and is not a stock recommendation or investment advice.

Sumitomo Chemical India manufactures, imports and markets products for crop protection, grain fumigation, rodent control, bio pesticides, environmental health, professional pest control, etc. The company has a presence in Africa and several other geographies around the world.

The company is a debt-free company with a strong return on equity of 17.5%. The return on capital employed (RoCE) also remains strong at 23.7%.

On the financial front, Q2FY26, revenue was placed at ₹929.8 crore versus ₹988.3 crore in the corresponding period last year. The net profits of the company were placed at ₹177.8 crore, a drop from ₹192.5 crore year-on-year.

During the quarter, Sumitomo Chemical India saw its domestic crop protection business being impacted by wet weather. However, some of the key brands of the company, like Sumimax, new product launches like Excalia Max, Lentigo and also some old herbicide formulations, continued to gain traction and reinforce the company’s market leadership.

According to the company's management, it approaches the second half of 2025-26 with cautious optimism. Healthy reservoir levels, sufficient soil moisture, and a typical monsoon withdrawal, according to the company, bode well for the impending Rabi season.

Since late September, field conditions have greatly improved, which should encourage a recovery in farming activity and input demand, increasing demand for the company's goods.

In terms of manufacturing, Sumitomo Chemical India has commenced backward integration for selected molecules at its Tarapur facility. The company has also made significant progress in project planning, regulatory approvals for its upcoming greenfield expansion at Dahej.

All of these should help the company’s performance going forward.

PI Industries is a leading Indian agrochemical company specializing in crop protection solutions and custom synthesis manufacturing.

The company operates with a strong focus on research and development, serving both domestic and international markets through innovative partnerships.

The company has a strong RoE of 16.3% and a RoCE of 21.3%. PI Industries is also a debt-free company.

On the financial front, PI Industries reported a drop in revenues and net profits for Q2FY26. The revenues of the company fell to ₹1,872.3 crore from ₹2,221.0 crore YoY. Net profits too dropped to ₹407.2 crore from ₹507.5 crore YoY.

During Q2 FY26, the performance broadly reflected current market conditions and was in line with the company’s plan, except for the domestic market, where excessive and uneven rainfall and abrupt regulatory actions in the biological areas impacted the demand scenario.

Moving ahead, after commercializing five new molecules in H1, PI Industries is on track to commercialize eight to ten more in the current fiscal year.

The domestic development pipeline includes over 20 new products scheduled for future development and registration.

The company says that they remain committed to harnessing cutting-edge technologies and leveraging an integrated model to drive niche offerings. Furthermore, the company has robust cash flows and sustainable returns on capital.

Serving approximately 4,000 clients in 30 industries, Atul Ltd is a sizable integrated chemical company in India that produces about 900 products and 400 formulations.

Organic intermediates, polymers and resins (like epoxy phenol novolac and resorcinol formaldehyde), dyes and pigments (like sulphur black and vat dyes), agrochemicals and pharmaceutical APIs are all included in the product line.

On the financial front, for Q2 FY26, Atul reported sales of ₹1,551.9 crore against ₹1,392.8 crore YoY. Net profits of the company were ₹181.2 crore against ₹136.4 crore YoY.

India has recently implemented a five-year anti-dumping duty on liquid epoxy resins.

Since Atul produces epoxy resins, the imposition of a five-year anti-dumping duty on liquid epoxy resins is probably going to be advantageous for the company.

The company is likely to implement debottlenecking and expand existing products and product groups. It also intends to increase downstream and upstream products, entering related products and product groups, while introducing retail products and formulations.

Purchasing stocks that appear undervalued requires careful thought. These stocks could be oversold or undervalued, offering possible purchasing opportunities, particularly if the low price is the result of transient circumstances.

Despite the potential value of some of these stocks, investors must conduct independent, in-depth research.

Investors should evaluate the company's fundamentals, corporate governance, and valuations of the stock as key factors when conducting due diligence before making investment decisions.

Happy Investing.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.

This article is syndicated from Equitymaster.com.

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