Neogen Chemicals has witnessed a notable increase in its share price, soaring by 6.06% to reach ₹2,345 per share during intraday trading on the Bombay Stock Exchange (BSE). This surge follows the initiation of coverage by Axis Capital, which assigned an 'Add' rating to the stock and raised its target price to ₹2,440 per share. This adjustment indicates a potential upside of approximately 9% based on Monday’s closing price. Investors looking to invest in stocks may find this development particularly noteworthy.
Neogen Chemicals' diverse portfolio
As one of India’s leading manufacturers, Neogen Chemicals specialises in bromine-based compounds, lithium and bromine salts, and Grignard chemicals. The company boasts a diverse speciality chemicals portfolio that includes pharmaceutical intermediates, agrochemical intermediates, engineering fluids, electronic chemicals, polymer additives, water treatment chemicals, construction chemicals, and flavours and fragrances. This breadth of products positions Neogen favourably in various sectors, appealing to a wide range of customers.
Growth projections for Neogen Chemicals
According to Axis Capital, Neogen’s core business is projected to achieve an impressive compound annual growth rate (CAGR) of 18% from FY24 to FY27. This growth is anticipated to be driven by increased capacity utilisation in organic chemicals and a gradual ramp-up of inorganic chemicals. The company’s strategic decision to diversify its revenue streams—from agrochemicals to flavours, fragrances, and pharmaceuticals—has been highlighted by analysts as a significant factor contributing to its growth potential.
The brokerage firm’s report emphasised that Neogen's core business would benefit from optimised capacity utilisation in organic chemicals, supported by advancements in intermediates and the company’s evolving focus on various segments. The report noted, “Neogen’s core business is expected to see 18% CAGR over FY24-27E, as it optimises capacity utilisation in organic chemicals, led by advanced intermediates, CSM, and BuLi Chem, while inorganic chemicals see a gradual ramp-up.”
Performance in organic chemicals
Neogen has achieved a remarkable 25% volume CAGR in organic chemicals between FY22 and FY24. An EBITDA CAGR of 17% complements this success despite experiencing sharp pricing corrections in bromine and lithium. The company’s robust performance in this sector underscores its ability to adapt and thrive amidst fluctuating market conditions.
Furthermore, Neogen is strategically positioned to capitalise on the increasing demand for electrolytes (EL) for electric vehicle (EV) batteries. This is made possible through a technology partnership with MUIS and its capability to source lithium from a diverse range of global suppliers. With plans to commission 30 kilotonnes of EL capacity and 5.5 kilotonnes for lithium salts by the second half of FY26, Neogen aims to establish itself as a prominent non-China supplier, particularly in light of the US Inflation Reduction Act, enhancing its export potential.
Financial stability and future outlook
In terms of financial health, Neogen has secured funding through an ₹11 billion loan at favourable terms, which will support its expansion initiatives. The brokerage anticipates a 35% CAGR in EBITDA from FY24 to FY30, with the salt business expected to reach optimal utilisation by FY27, primarily driven by export opportunities.
As of the latest trading session, Neogen Chemicals boasts a market capitalisation of ₹5,922.69 crore. However, by 1:13 PM, the company’s shares had pared some gains, trading at ₹2,245.00 per share, reflecting a modest increase of 1.54%. In comparison, the BSE Sensex experienced a slight uptick of 0.06% to reach the 84,977 level.
In conclusion, Neogen Chemicals’ positive outlook, supported by its diverse product offerings and strategic growth initiatives, makes it an appealing prospect for those looking to invest in stocks within the speciality chemicals sector.
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