Clean Science Shares Gain On Product Foray, Motilal Oswal’s ‘Buy’ Rating
Shares of Clean Science & Technology Ltd. jumped after the specialty chemicals maker announced its foray into a new series of compounds, and Motilal Oswal initiated coverage on the stock with a ‘buy’.
The recently-listed company said it was foraying into hindered amine light stabilizers, used in diverse end industries including polymerisation inhibitor, water treatment, paint industry, coatings industry, according to an exchange filing.
The estimated market size for HALS series globally, according to the company, is about $1 billion. In unit-3, Clean Science is launching the first line of production dedicated towards HALS series, which is expected to commercialise by the second half of FY23.
Separately, Motilal Oswal said the chemical company has emerged as the global leader in most of its product categories on the back of niche offerings catering to polymer inhibitors / superabsorbents, anti-oxidants for the food/feed industry, pharma, home, and personal care. “It has further bolstered its value chain through novel manufacturing technology based on green chemistry for one of the key raw materials,” the brokerage said in note.
According to Motilal Oswal, the company’s strong research and development capabilities has contributed to gross margin expansion.
“The company has posted a robust revenue CAGR of about 29% in the last five years,” the note said. “We expect Clean Science’s revenue to grow at a CAGR of around 23% over FY21-24 on the back of capacity additions at unit-III in phases over FY22.” The company, the brokerage said, also plans to capture higher market share for its products.
Its Ebitda margin, the note said, is likely to remain robust at about 49%, with the gross margin at nearly 70% over FY21-24, as the company continues to improve the yield of its products and processes.
Motilal Oswal set a target price of Rs 1,700 apiece on the stock. That implies a potential upside of 18%.
The brokerage also highlighted a few risks associated to its recommendation.
Lack of innovation in future which has helped Clean Science differentiate itself from others until now.
Rising prices of key raw materials such as phenol, which could suppress its gross margins.
Any adverse ruling on the usage of any of its key products, which could affect global demand and, in turn, sales.
Shares of the Pune-based company jumped as much as 7.7% to Rs 1,548 apiece in early trade on Monday.