On Monday, Clean Science and Technology Ltd, a chemical manufacturing unit’s stock earned more than 7% in its initial days on the National Stock Exchange. Clean Science is an innovation-driven speciality chemical manufacturer and its shares have had a good run since its listing in July. Its issue price in its initial public offering (IPO) was priced at Rs900 per share. After which, the company shares started trading at Rs1548 per unit, constituting a 70% increase from its issue price.
In an official data released on 30 August, Analysts at Motilal Oswal Financial Services said, “Because of its dominating product market share and ability to sustain the highest margins in the industry, we value the company at 50 times FY24E earnings per share (as the company commands ROIC of about 75%) to arrive at a target price of Rs1700 per share.”
The associated broker averred, “Clean Science is an integrated player for its key products and is likely to grow at a faster rate than the industry due to its cost advantage as well as the introduction of new products. On this consideration, we forecast a revenue/ Ebitda/ PAT CAGR of 23%/22%/22% over FY21–24.”
In a presentation to the group of investors, Clean Science displayed that its revenues have improved at a CAGR of 28% over three years from FY18-21. On the other hand, PAT witnessed a rapid growth of 59%, backed up with a sturdy margin over the same quarter. The company’s operating revenues surged by 9% in the July quarter against the March quarter. Additionally, during the first quarter, the company received 72% of its revenues from performance chemicals.
Motilal Oswal’s analysts said, “The key risks to our recommendations are:
(a) the lack of innovation in future – which has helped Clean Science differentiate itself from others until now,
(b) rising prices of key raw materials such as Phenol, which could suppress its gross margins,
(c) any adverse ruling on the usage of any of its key products, which could affect global demand and, in turn, sales.”