Motilal Oswal's research report on Clean Science & Technology
Clean Science (CLEAN)’s reported EBITDA in 2QFY25 was below our estimate at INR897m (+20% YoY), with a gross margin of 62.4% (vs. 65.9% in 2QFY24). EBITDAM contracted to 37.7% from 41.3% in 2QFY24. Revenue contribution of Performance Chemicals increased 2% YoY in 2QFY25, while that of Pharma & Agro Intermediates declined 1% YoY. PAT increased 13% YoY to INR587m. A strong YoY growth was observed across various segments, fueled by higher volumes, with the markets in the Americas and China witnessing meaningful expansion. Absolute revenue doubled in the Americas on a sequential basis as commissioning of HALS701 opened up the market for water treatment chemicals. Management highlighted that there was on average 70% capacity utilization for the standalone business, while the utilization for the HALS segment was very low due to the recent commissioning of the plant.
Outlook
The company is expected to generate INR5.6b in FCF during FY25-27, with a planned capex of INR5.9b over the same period. The stock is currently trading at ~41x FY26E EPS of INR36 and ~31x FY26E EV/EBITDA. We value the stock at 35x Sep’26E EPS to arrive at our TP of INR1,430. Reiterate Neutral.
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