Motilal Oswal's research report on Clean Science and Technology
Incorporated in CY03, CLEAN is among the few global organizations focused on developing ingenious technologies with unique, innovative and cost-effective catalytic manufacturing processes. Globally, CLEAN is the largest manufacturer of certain chemicals that have been developed in-house. CLEAN currently has three units, all in the MIDC Kurkumbh Industrial Area, with a total capacity of 44ktpa — Performance Chemicals - 18ktpa, Pharma and Agro intermediates - 6ktpa and FMCG Chemicals - 20ktpa (largely Anisole). It is adding incremental capacities in the Hindered Amine Light Stabilizer (HALS) series, which should increase its total capacity to ~54ktpa (likely to be commissioned by Dec’23). Unit 1 is the oldest site and manufactures MEHQ, Guaiacol, 4MAP and BHA. At Unit 1, the company has converted its erstwhile Anisole capacity (produced through liquid phase technology) to produce Veratrole. Unit 2 also produces legacy products. The company manufactures new products, TBHQ, p-BQ and HALS, at Unit 3, along with other products. CLEAN focuses on its process efficiencies to improve yields of its products, which has helped the company reduce costs, expand its margin and become the market leader in most of the products globally. The company plans to expand its R&D team to ~100 scientists from 75-80 scientists currently.
Outlook
The stock is trading at a PE of 40x on FY25E EPS of INR33.6 and 28x FY25E EV/EBITDA. We value the company at 40x FY25E EPS to arrive at a TP of INR1,345. We maintain a Neutral rating on the stock.
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