Accumulate Clean Science and Technology Ltd for the Target Rs 769 by Prabhudas Liladhar Ltd
Strategic partnership to accelerate HALS growth
Clean Science and Technology reported consolidated revenue of INR3bn in Q2FY27, up 22.4% YoY and 11.5% QoQ, driven by volume growth of ~10% and improved realizations of ~13%. The HALS segment recorded 2x YoY revenue growth, supported by strong volume ramp-up, with H1FY27 volumes already reaching 67% of FY26 volumes. HALS contributed ~22% of quarterly sales, while capacity utilisation improved to 40%, the management targets it to reach 55–60% over the coming quarters. Product mix still includes 60% of HALS 770, the product mix is gradually expected to shift to higher-grade HALS. Commercial shipments under the Geneus collaboration are expected to commence in Dec'26
Elevated raw material costs, particularly phenol and acetone, coupled with lower Chinese pricing, restricted the company's ability to pass on cost increases which resulted in margin moderation. HQ and Catechol capacity is operating at 30–35% utilisation, largely catering to captive requirements. Performance Chemicals II is now expected to commence commercial production in Q4FY27. While the ramp-up in HALS and upcoming projects provide medium-term growth opportunities, execution and timely commercialisation of new capacities remain key monitorables. With the recent correction, valuations have turned more attractive. The stock is trading at 16x FY29 EPS, we value the stock at 19xSep’28 EPS and maintain our Accumulate rating on the stock..
Revenue increases by 22%YoY/12%QoQ: Consolidated revenue stood at INR3bn, 22.4% YoY/11.5% QoQ (PLe: INR2.9bn, Consensus: INR2.9bn). H1FY27 revenue was at INR5.7bn, 16.5% higher than H1FY26. driven by higher volume. Gross profit margin was at 57.3% (vs 60.7% in Q2FY26 and 60.9% in Q1FY27), margin contracted by 340bps YoY and 360bps QoQ due to increase in overall raw material cost. Gross profit Increased by 16% YoY and 5% QoQ
EBITDAM contracted by 410bps YoY: EBITDA stood at INR 921mn,5.7% YoY/ -4.5% QoQ (PLe: INR1,015mn, Consensus: INR938mn), EBITDA margin came at 30.8%, contracted by 480bps YoY and 510bps QoQ (vs 35.6% in Q2FY26 and 35.9% in Q1FY27), YoY declined due to increase in overhead costs. H1FY27 EBITDA increased by 0.8% to Rs1,885mn. Reported PAT was at INR557mn, 0.5% YoY/ -24% QoQ. PAT margins were at 19% vs 23% in Q2FY25 and 27% in Q1FY27.
Concall takeaways:
(1) Export: Domestic mix was 73%:27% compared to 64%:36% in Q1FY27.
(2) RM cost remained elevated during Q2FY27 as geopolitical tensions in the Middle East kept crude linked feedstock prices were high.
(3) Key raw materials, including phenol, acetone and methanol, witnessed a 50–100% YoY increase, alongside higher coal and freight costs.
(4) Consolidated 23% YoY growth was driven by 10% volume and 13% improvement in realizations.
(5) Revenue mix during H1FY27 Performance Chemicals: 77%, Pharma Intermediates: 14% and FMCG: 7%.
(6) Chinese prices of key raw materials were 10–15% lower than India.
(7) Performance Chemicals 2 is expected to be commercialised in Q4FY27.
(8) HALS revenue doubled YoY in Q2FY27, supported by volume growth.
(9) 60% of the HALS portfolio comprises HALS 770, while advanced HALS products contribute 40%.
(10) Successfully completed trials for the advanced-grade HALS product, Commercial launch is expected to commence in H2FY27 with initial focus on Europe.
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SEBI Registration number is INH000000933
