Hold Clean Science and Technology; target of Rs 1425: Prabhudas Lilladher

Prabhudas Lilladher's research report on Clean Science and Technology

Clean Science and Technology (CLEAN) reported revenue of Rs2.4bn in Q1FY26, marking an 8.4% YoY increase but a 7.9% QoQ decline. The sequential dip in topline was due to lower sales of newer products such as DCC and TBHQ. The Pharma & Agro Intermediates segment witnessed the sharpest decline, with revenue down 32% QoQ. Volume for the company’s established products remained strong, supporting a robust standalone EBITDAM of 46%, driven by lower raw material costs. HALS volume stood at 540tn. The management reiterated its guidance of 4,500tn for HALS volume in FY26, with new HALS grades priced at USD11–35/kg expected to be launched over the coming quarters. HALS is likely to break even at the EBITDA level by Q2FY26, with monthly sales expected to reach Rs100mn. The HALS subsidiary reported EBITDA loss of Rs80mn in Q1FY26. On the capex front, water trials at Performance Chemicals 1 are scheduled for Aug’25, with commercialization of the facility targeted for Sep. Performance Chemicals 2 is on track for commercialization in Q4FY26. Looking ahead, these new capacity additions are expected to be key growth drivers.

Outlook

However, the company’s margin profile may face some pressure, as certain new products such as HALS are expected to yield lower profitability compared to the legacy portfolio. At its current valuation of 41x FY27 EPS, we maintain ‘HOLD’ rating on CLEAN, with target price of Rs1,425 valuing it at 40x FY27 EPS.