Neogen Chemicals Ltd. share price target

manufactures specialty organic bromine-based chemical compounds as well as specialty inorganic lithium-based chemicals compounds. Neogen has two segments viz. (i) organic chemicals, (ii) inorganic chemicals...

The asset turn is expected to be around ~2.7x, which provides incremental revenue visibility of ~| 350 crore. Since both these business verticals are margin accretive thus, incremental revenue share from both segments is...

We expect strong EBITDAand PAT CAGRs of 35/47% over FY22-24E. We initiate coverage on NCL with a BUY and target price of INR 1,220, (WACC 10%, terminal growth 5%). The stock is trading at 43.4/28.0 on FY23/24E EPS. Neogen Chemicals Ltd (NCL) is a leading manufacturer of bromine and lithium-based derivatives in India with technocrat promoters at the helm. We believe the improvement in the share of custom synthesis manufacturing (CSM) and advanced intermediates will result in strengthening of the balance sheet and manifest earnings visibility. The tripling of its organic chemicals manufacturing capacity will not only allow it to fulfil commitments of the two long-term contracts, but also bestow flexibility in selection of new molecules. Capacity expansion will accelerate the pace of growth, which was previously curtailed by limited infrastructure.

Consistent quarter; capex commissioning to herald growth

Both phase 1, 2 expansion at Dahej would expand organic chemical capacity by 3x with a capex of | 130 crore. This would translate into incremental revenue of | 350-375 crore at peak utilisation against overall revenues of | 306 crore currently. We expect the Dahej facility to largely cater to the custom synthesis opportunity with the Vadodara plant catering to advanced intermediates market. Given both these segments have better gross margins compared to the base business, increase in the share of these segments is...

Neogen Chemicals (Neogen) is a play on the niche segment of organic bromine derivatives.

We met the management of Neogen Chemicals to get an update on company's growth prospects post stellar initial offering. The company is a leading bromine and lithium based specialty chemicals player with OVER 300...