Neutral Clean Science and Technology; target of Rs 1260: Motilal Oswal

Motilal Oswal's research report on Clean Science and Technology

Clean Science (CLEAN) missed our 1QFY24 EBITDA estimate, with a gross margin of 61.4% (vs. expected 69.8%), due to increased raw material costs and sales decline. EBITDAM stood at 40.5% (vs. 39% in 1QFY23). FMCG Chemicals grew QoQ in 1QFY24, while Performance Chemicals and Pharma & Agro Intermediates declined. The management attributed the sales decline to 2/3rd volume decrease and 1/3rd lower prices. However, the company maintained its market share as the overall market also declined, adversely impacting product volumes. The current product prices are at their lowest, but the management does not anticipate further declines, due to increasing raw material costs linked to rising crude prices.

Outlook

The stock is currently trading at 41x FY25E P/E with an EPS of INR 31.5 and 29x FY25E EV/EBITDA. Our target price is INR 1,260, based on 40x FY25E EPS. We reiterate our Neutral rating on the stock.