Neutral Clean Science & Technology; target of Rs 770: Motilal Oswal

Moneycontrol • 1 day ago

Original source

Key Investment Pillars

  • Growth in HALS business: The HALS business recorded 2x YoY revenue growth, with current capacity utilization at 35-40% and expected to increase to 55-60% over the coming quarters.
  • Commercialization of Performance Chemical II: Expected to commence in 4QFY27, with management targeting 20-25% capacity utilization in the first year.
  • Backward integration: The company has initiated backward integration of key starting materials to improve cost competitiveness and margins.
  • Raw material price volatility: Elevated raw material prices due to geopolitical tensions and higher crude-linked feedstock costs may continue to impact margins.

Thesis Validation Checklist

  • Revenue growth: Monitor revenue growth across segments, particularly in the HALS business.
  • Margin expansion: Track the expansion of gross margin and EBITDA margin, driven by the increasing contribution from higher-grade HALS products and backward integration benefits.
  • Capacity utilization: Monitor the increase in capacity utilization in the HALS business and the commercialization of Performance Chemical II.
  • Raw material prices: Keep an eye on the volatility in raw material prices and its impact on margins.