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Guidance remains strong with healthy new product pipeline

* Incorporated in CY03, CLEAN is among the few global organizations focused on developing ingenious technologies with unique, innovative and cost-effective catalytic manufacturing processes. Globally, CLEAN is the largest manufacturer of certain chemicals that have been developed in-house.

* We visited the company’s Kurkumbh plant on 17th Mar’23, followed by a management meeting with Mr. Siddhartha Sikchi, ED, and Mr. Pratik Bora, VP Corporate Finance. Here are the key highlights:

Focus on process efficiencies to improve yields

* CLEAN currently has three units, all in the MIDC Kurkumbh Industrial Area, with a total capacity of 44ktpa — Performance Chemicals - 18ktpa, Pharma and Agro intermediates - 6ktpa and FMCG Chemicals - 20ktpa (largely Anisole). It is adding incremental capacities in the Hindered Amine Light Stabilizer (HALS) series, which should increase its total capacity to ~54ktpa (likely to be commissioned by Dec’23).

* Unit 1 is the oldest site and manufactures MEHQ, Guaiacol, 4MAP and BHA. At Unit 1, the company has converted its erstwhile Anisole capacity (produced through liquid phase technology) to produce Veratrole. Unit 2 also produces legacy products. The company manufactures new products, TBHQ, p-BQ and HALS, at Unit 3, along with other products.

* CLEAN focuses on its process efficiencies to improve yields of its products, which has helped the company reduce costs, expand its margin and become the market leader in most of the products globally. The company plans to expand its R&D team to ~100 scientists from 75-80 scientists currently.

Robust capex gives revenue visibility

* The company’s top four products, MEHQ, Guaiacol, BHA and 4-MAP, contribute 85% of the total revenue currently. Revenue from the already existing products is expected to be ~INR12b in FY25, with increasing demand for its products being seen. MEHQ and BHA are largely exported, while Guaiacol is largely sold in the domestic market.

* CLEAN has also set up its first line of HALS series (701 and 770) at Unit 3 (2ktpa). Additional capacities in the whole range of HALS will come up in Unit 4 (10ktpa) under its wholly owned subsidiary Clean Fino-Chem Limited, which is expected to be fully commissioned by FY25.

* Revenue from HALS is expected to rise to ~INR7b by FY27-28, assuming a 10% market share of the USD1b global market for the whole range of products. Some products are at advanced stages of R&D and are expected to contribute ~INR3b additionally, taking the total sales to INR25b by FY27-28. The total capex for the HALS series is INR3b in the subsidiary, with another INR2b for other new products.

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