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SSB ranks Reliance amongst best global picks

NetScribes/Salil Panchal

Leading investment bank and research firm Salomon Smith Barney has shortlisted its best global picks in the chemical industry.

This comes after the industry has witnessed a global cyclical trend of lower polymer prices, which has impacted some of the leading Asian chemical companies in previous months.

Salomon, in its report, has now chosen Air Liquide, DuPont, Hercules, Nan Ye Plastics, Reliance Industries and Rohm and Haas as its top picks.

Most of these scrips have been given a 'buy' recommendation accompanied with a low-medium risk.

Reliance Industries -- which was recently rated as one of the most profitable Asian companies by Asiaweek -- commands this position due to the strong demand growth in the Indian market and will also obtain higher margins due to import duty protection. Salomon has now projected a bullish trend for polyester prices and Reliance would then be able to withstand the downturn in polymers.

Reliance has been given a buy recommendation and a low-risk. The scrip has been amongst the few old economy stocks which has remained steady in a once-again weak market following the arrest of diamond merchant and film financier Bharat Shah.

The Salomon Smith Barney report states that with global oil prices to fall further in 2001, DuPont should be able to maintain pricing for its products which would aid higher margins. "The collapse in DuPont's share price has been due to the high oil prices and the company's warning that its pharma business needed to be scaled down. We expect divestment to happen in its pharma business and this could fetch upto $ 5 billion,'' the report states.

Rohm and Haas, the US-based speciality chemicals company, is expected to show a strong cash flow statement over the coming year which could be augmented by asset sales and help the company lower its debt position. "In the longer term, we believe that valuation will benefit from falling raw material costs. We have already begun to see this in propylene prices, which have fallen since the middle of 2000,'' the report stated.

Hercules is one of the leading suppliers of chemicals, which are used in the pulp and paper industry. The company is now being viewed as a strong takeover candidate and hence its rating has been upgraded to a 'buy'.

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