Hold Clean Science and Technology; target of Rs 1002 Prabhudas Lilladher

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26 Aug, 2025 12:21

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Clean Science and Technology (CLEAN) reported revenue of Rs 2.4bn in Q2FY26, registering a modest 2.7% YoY and 0.7% QoQ increase. Growth was impacted by a decline in revenue from established products, which contributed 80% of the revenue mix, down from 84% in Q1FY26. The FMCG chemicals segment saw the steepest drop, driven by backward integration by a key Chinese customer. HALS volumes averaged 260tn per month, reflecting a strong 25% sequential increase, and management expects continued volume growth in coming quarters. A reduction in raw material costs supported an improvement in HALS gross margins, rising from 31% to 35%. As per our calculation HALS subsidiary reported an EBITDA loss of 29mn in Q2FY26. On the capex front, chemical trials at Performance Chemicals 1 are underway, with revenue contribution expected from Q4FY26. Performance Chemicals 2 remains on schedule with water trials expected from April’26. Looking ahead, these upcoming capacity additions are expected to drive growth; however, margin pressures may persist due to lower realizations in certain established products and the relatively lower profitability of the HALS portfolio compared to the legacy business.

At its current valuation of 24x Sep’27 EPS, we maintain ‘HOLD’ rating on CLEAN, with target price of Rs1,002 valuing it at 25x Sep’27 EPS.

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