Buy Archean Chemical Industries; target of Rs 621: KR Choksey

KR Choksey is bullish on Archean Chemical Industries has recommended buy rating on the stock with a target price of Rs 621 in its research report dated February 13, 2025.

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February 13, 2025 / 15:02 IST

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KR Choksey's research report on Archean Chemical Industries

Archean chemical missed our estimates on all front as volume pick-up continues to lag. The PAT declined during the quarter by 53% YoY but there was 7% growth in EBITDA on sequential basis aided by improvement in margin. The volume growth was largely flat for Q3FY25 with Bromine volume recorded at 4600 MT vs 4800 MT in Q2FY25 and Industrial salt recorded at 0.76MT Vs 0.79 Mn in Q2FY25. Though there is certain moderation in demand but locked in volumes for bromine and industrial salt should lead to improving trajectory in the coming quarters. The sharp fall in realization for bromine ( INR 197,062/MT in 9MFY25 vs INR 257,665/MT in 9MFY24) and material decline in volume of industrial salt (2.2 MnT in 9MFY25 vs 3.3 MT9MFY24) have led to sharp fall of -24%/-40%/-59% in revenue/ EBITDA/ PAT during 9MFY25 on YoY basis. The moderation in the realization of bromine and decline in the volume of Industrial salt was further aggravated by the delayed contribution in bromine derivative and Oren Hydrocarbon which led to the weak performance in Q3FY25. We have cut our EPS estimates for FY25E/FY26E/FY27E to INR 17/INR 32/INR 41 ( previously INR 29/INR 45/INR 56) on account of gradual volume pick up and delayed start in derivative and Oren business.

Outlook

However, we believe the worst is behind and ACI is on a recovering path hereon as the bromine derivative business coupled with Oren Hydrocarbon is gearing up for decent start in FY26E in the backdrop of improving volume run rate for Industrial salt. We roll-over our valuation multiple t0 FY27E EPS of INR 41 and re-iterate our “BUY” rating , applying a PE multiple 15x on FY27E EPS with the revised target price of INR 621 (Previously INR- 890).

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