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HDFC Securities Institutional Equities
We maintain Sell on Clean Science and Technology Ltd. with a price target of Rs 1,037 (weighted average cost of capital 11%, terminal growth 6%), owing to-
slower-than expected ramp-up in hindered amine light stabilisers and
entry of domestic competitors in mono methyl ether of hydroquinone manufacturing.
We believe Clean Science has an import substitution opportunity in HALS. However, the upcoming capacity augmentation in HALS by competitors and muted demand growth shall remain challenges to growth in HALS revenue. Therefore, HALS revenue growth could be slower than we had anticipated earlier.
We have lower revenue estimates from HALS in FY25 and FY26. Ebitda and profit after tax shall grow at a 23/23% compound annual growth rate over FY24E-27E.
The return on equity is expected to improve from 21.6% in FY24E to 22.2% in FY27E. We believe the valuation is contextually high at 41/34/31 times FY25E/26E/27E earnings per share.
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