I think the basic questions while investing in SNCL are:
Fundamental shift or not?
Whether there is a fundamental shift in the chemical industry due to China’s clampdown on pollution, or not.
First, will China go back to its commitment to stringent pollution norms? China has not gone back in the last 2 years. I don’t see it doing so. Many Indian chemical companies are investing in huge capacity expansions ranging from 0.5x to 6-7x, not without reason.
Second, if MAP production was not profitable for SNCL until 2 years back, why would it be profitable for any Chinese factory after the clampdown on pollution, if MAP prices were to fall to the 2016 levels? This makes a case for sustainability of MAP prices above the 2016 levels.
Commodity play or not?
Whether it is a pure commodity play, or is it really difficult to produce and sell high-quality MAP as the management claims in its commentary (link in my earlier comment). Does SNCL have an advantage of vertical integration as management claims, which reduces the dependency on sourcing intermediates from other manufacturers? Does SNCL have the advantage of long-term relationship over decades with big customers?
33% import by China (as per another comment above) seems to suggest that Chinese MAP suppliers are buying MAP from the likes of SNCL and selling to their customers in order to sustain their long-term relationships. Will these customers start partially importing from Indian companies to hedge their position in the long term?