Clean Science shares surge after Anand Rathi initiates coverage with ‘Buy’
Shares of specialty chemical manufacturer Clean Science and Technology (CSTL) rose more than 3% to ₹1,619 per share on the BSE in Friday’s afternoon deals after brokerage firm Anand Rathi initiated coverage on the stock with a ‘Buy’ rating. Clean science shares made its stock market debut in mid-July and the specialty chemical stock has appreciated over 75% from its issue price of ₹900.
Anand Rathi said that Clean Science has a steady revenue growth and improved and healthy operating profitability over the three fiscals through 2021. Enhanced capacities of key products such as mono methyl ether of hydroquinone (MEHQ), guaiacol and butylated hydroxyanisole (BHA) and steady demand for these products supported revenue growth amid the pandemic in fiscal 2021.
The Pune-based company manufactures functionally critical specialty chemicals such as performance chemicals, pharmaceutical intermediates, and FMCG chemicals. Anand Rathi has initiated its coverage on the company with a Buy rating and a target price of ₹2,020 per share.
“The financial risk profile is robust marked by almost debt-free balance sheet, strong accretions and maintenance of surplus liquidity. Net-worth has remained strong and debt protection metrics continue to remain robust due to negligible debt and healthy profitability. Further company has surplus liquid investments of over ₹2,200 million," the brokerage added.
It believes that the company has an established market position and dominant presence in key specialty chemical products, and a diversified clientele. Additionally, Clean Science has a healthy operating efficiency and robust financial risk profile. As its products are used largely in manufacturing essential goods, hence it has seen limited impact of the Covid-19 pandemic, the note by Anand Rathi stated.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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Clean Science shares jump over 7% after Motilal Oswal initiates coverage
Clean Science and Technology Ltd’s stock gained more than 7% in early deals on Monday on the National Stock Exchange. Clean Science is an innovation driven specialty chemical manufacturer and its shares have had a good run since its listing in July.
For perspective: The issue price at the time of its initial public offering (IPO) stood at Rs900 per share. Clean Science’s shares are now trading at around Rs1548 apiece, which represents over 70% appreciation from its issue price.
In a report on 30 August, Motilal Oswal Financial Services Ltd’s analysts have said, “In view of its dominating product market share and ability to sustain the highest margins in the industry, we value the company at 50 times FY24E earnings per share (as the company commands ROIC of about 75%) to arrive at target price of Rs1700 per share." ROIC refers to return on invested capital.
The broker also added, “Clean Science is an integrated player for its key products and is likely to grow at a faster rate than the industry due to its cost advantage as well as the introduction of new products. On this consideration, we forecast a revenue/ Ebitda/ PAT CAGR of 23%/22%/22% over FY21–24."
Ebitda is earnings before interest, tax, depreciation and amortization; a key measure of profitability for companies. PAT and CAGR are profit after tax and compound annual growth rate, respectively.
In its latest investor presentation, Clean Science said its revenues have grown at a CAGR of 28% over FY18-21. PAT has grown at a faster rate of 59% over the same time frame, helped by strong margin performance.
In the June quarter (Q1FY22), Clean Science’s operating revenues increased by 9% compared to the March quarter. During Q1, the company derived as much as 72% of its revenues from performance chemicals.
However, given the sharp appreciation in Clean Science’s shares since its listing, it is likely that near-term gains may be limited. Motilal Oswal’s analysts said, “The key risks to our recommendations are (a) the lack of innovation in future – which has helped Clean Science differentiate itself from others until now, (b) rising prices of key raw materials such as Phenol, which could suppress its gross margins, (c) any adverse ruling on the usage of any of its key products, which could affect global demand and, in turn, sales."
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Stocks to Buy – Clean Science and Technology – share up 6% on NSE, BSE – BUY with Stop Loss in mind, says analyst; puts target price at this level
Stocks to Buy – Clean Science share price – The shares of Clean Science and Technology Limited were trading with a positive bias on Monday. It was up by almost 6 per cent or Rs 87 on the NSE at around 12:55 pm and were trading at Rs 1524. This stock has been recently listed and has given almost 70 per cent from the issue price of Rs 900.
Nilesh Jain, Assistant Vice President (AVP), Equity Research Technical and Derivatives at Centrum Broking said that investors willing too take a bet on this stock can go ahead. However, he also sounded a caveat. Jain said that since the stock was listed on 19 July 2021, so there is not enough data to read the trends accurately. But, the current status looks promising, he further said.
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Since its listing, Clean Science Technology shares attained a life high of Rs 1779 on the NSE on 22 July 2021. The low stands at Rs 1422.10. The stock has traded both ways over the last 6-7 trading sessions.
Jain said that the upside is open till levels around Rs 1700. He said that the stop loss should be around Rs 1400. Investors willing to make a fresh position can do that with the stop loss in mind.
Meanwhile, on the BSE, the stock was trading around Rs 1523, up by almost Rs 84 or 5.9 per cent. The stock opened at Rs 1472 while achieving an intraday high of Rs 1568. The intraday low is Rs 1470.
The strengths of this stock is its low debts with its ability to generate cash from the core business. The cash flow has improved over a period of two years. The profits have also improved during this period.
Among negatives, company has been facing year-on-year growing cost for long term projects according to Edelweiss analysis.