Motilal Oswal’s research report on Clean Science and Technology (CLEAN) highlights the company’s significant advancements in research and development (R&D) during the fiscal year 2024. The firm’s emphasis on innovation and sustainability has led to critical milestones, including the successful commercialization of its HALS (Hindered Amine Light Stabilizers) series and the development of pharmaceutical intermediates.
Key Developments and Growth Drivers
- Ongoing Projects: Currently, CLEAN is advancing 10 new molecules, which are expected to foster growth in the pharmaceuticals, polymers, and sustainable agrochemicals sectors.
- Clean Fino Chem (CFCL): As a wholly-owned subsidiary of CLEAN, CFCL is ramping up HALS production. The current capacity stands at 10.5 kilotons per annum (ktpa), with plans for expansion through Units 3 and 4 to meet the increasing global demand in the pharmaceutical and agrochemical markets.
- New Plastic Application Lab: This facility is anticipated to bolster HALS growth, while all future capital expenditures (capex) will be directed toward CFCL.
- Financial Projections: Between FY25 and FY27, the company is expected to generate a free cash flow (FCF) of ₹6 billion and plans to invest ₹5.5 billion in capex during the same period.
Valuation and Outlook
Currently, the stock trades at approximately 43 times the expected earnings per share (EPS) of ₹36 for FY26 and around 32 times the expected EV/EBITDA for the same period. Motilal Oswal has set a target price (TP) of ₹1,580, based on a valuation of 40 times the projected EPS for September 2026.
Important Points Summary
- R&D Achievements: Significant milestones in FY24 include the commercialization of HALS and development of pharmaceutical intermediates.
- Molecule Development: Ten new molecules in progress to drive growth in pharmaceuticals, polymers, and agrochemicals.
- CFCL Expansion: Scaling up HALS production with a current capacity of 10.5 ktpa and further expansion through Units 3 and 4.
- New Facilities: Establishment of a plastic application lab to support HALS growth.
- Financial Forecast: Anticipated FCF of ₹6 billion and capex of ₹5.5 billion from FY25 to FY27.
- Stock Valuation: Target price of ₹1,580, reflecting a valuation of 40x FY26E EPS.
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