Clean Science Q2 Results Review - Challenges Continue To Outweigh Benefits: Motilal Oswal

"BQ Prime’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer BQ Prime’s subscribers an opportunity to expand their understanding of companies, sectors and the economy..Motilal Oswal Report.Clean Science and Technology Ltd. missed our Q2 FY24 Ebitda estimate, with a gross margin of 65.9% (versus expected 59.2%). Ebitdam expanded to 41.3% (versus 39.4% in Q2 FY23) with moderation in raw material prices and improved profitability from newer products. Fmcg chemicals grew QoQ in Q2 FY24, while performance chemicals and pharma and agro intermediates declined.Management highlighted that the over production in China led to aggressive price of products, which hurt realizations of Clean Science in Q2. De-stocking continued in Q2 as demand in the U.S. was unusually low. Improved sales volumes were offset by declining prices as the overall market was a buyers’ market rather than a sellers’ market.  Management highlighted that sales from non-flagship products contributed 25% of overall revenues and expects it to be at a higher number with no capacity enhancements being implemented currently in the flagship products. Tertiary butyl hydroquinone and Dicyclohexylcarbodiimide sales were higher with Guaiacol sales lower because of ongoing issues in the cough syrup market..Clean Science announced a capex of Rs 300 million (out of the Rs 2 billion) dedicated to a pharma intermediate molecule. This single product will have dedicated production line and is expected to generate Rs 1 billion in revenue, primarily catering to the Indian market (to come online in the next nine months). Hindered amine lights stabilisers expansion in Clean Science is ongoing and on track to be commissioned by March- 24 (earlier guidance of December-23), but would take two-three years to reach optimal utilisation level.We anticipate continued weakness in performance of the company in the coming quarters. Consequently, we have revised down our revenue/Ebitda/ profit after tax estimate by -11%/-10%/-10% for FY24. Clean Science is currently trading at 46 times FY25E with earning per share of Rs 29.8 and 33 times FY25E enterprise value/Ebitda. Our target price is Rs 1,340, based on 45 times FY25E EPS. We reiterate our 'Neutral' rating on the stock..Click on the attachment to read the full report:.DISCLAIMERThis report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime..Users have no license to copy, modify, or distribute the content without permission of the Original Owner."

Clean Science Q2 Results Review - Challenges Continue To Outweigh Benefits: Motilal Oswal

The stock is currently trading at 46 times FY25E P/E with an earning per share of Rs 29.8.

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Clean Science Q2 Results Review - Challenges Continue To Outweigh Benefits: Motilal Oswal

The stock is currently trading at 46 times FY25E P/E with an earning per share of Rs 29.8.

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