Broker’s call: Clean Science (Neutral)

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Target: ₹1,580

CMP: ₹1,555.50

Clean Science & Technology’s R&D, focused on innovation and sustainability, achieved key milestones in FY24, including the commercialisation of HALS (Hindered Amine Light Stabilizers) series and the development of pharma intermediates. Currently, there are 10 new molecules in progress, which should drive future growth in the pharmaceuticals, polymers, and sustainable agrochemicals segments of the company.

Clean Fino Chem (CFCL), a wholly owned subsidiary of Clean, is scaling up HALS production (current total capacity of 10.5 ktpa) and expanding its capacity through Unit-4 and Unit-3 to meet rising global demand in pharmaceuticals, agrochemicals, and polymers. The new plastic application lab would further support HALS growth, while all future capex would happen in CFCL. While the commercial production from CFCL has commenced, the management expects HALS utilisation to reach 80 per cent in three years.

During FY25-27, the company is expected to generate ₹600 crore in FCF and plans to incur a capex of ₹550 crore. The company plans to finance this capex through internal accruals and is projected to maintain a net cash position in the future. The stock is currently trading at around 43x FY26E EPS of ₹36 and about 32x FY26E EV/EBITDA.