Accumulate Clean Science and Technology Ltd for the Target Rs 827 by Prabhudas Liladhar Ltd
Valuation offers comfort; execution a key monitorable
Clean Science & Technology’s (CLEAN) valuation has moderated to ~20x FY28E EPS, offering an attractive entry point with growth visibility expected to improve across its core portfolio and new product segments. After subdued growth amid pricing pressure in legacy products and slower-than-expected capacity ramp-ups, the company is poised for a recovery driven by HALS scale-up and new product commercialization. The 5-year Kemin supply agreement strengthens visibility in antioxidants, while the Geneus Chem partnership provides access to advanced NOR-HALS products. Hydroquinone (HQ) and catechol offer incremental growth and backward-integration opportunities, with Performance Chemical 2 slated for commercialization in H2FY27. While execution remains key given the past scale-up challenges, we expect sales/EBITDA/PAT to grow at 23%/22%/27% (BBG: 23%/21%/22%) CAGR over FY26– 29E. We upgrade the stock to ‘Accumulate’ from ‘HOLD’, retaining our TP of INR827.
HALS: Ramping up gradually:
HALS volumes increased from ~575t in FY24 to 1,900t in FY25 and 3,300t in FY26, reaching ~1,044t in Q1FY27, with exports contributing nearly 50% of sales. Higher grade products now account for 60% of the portfolio, while volume share of HALS 770 declined from ~50% to 35%, driving realizations up to ~US$5.8/kg from US$5/kg in Q4FY26. The management targets FY27 revenue of INR2.5–3bn, with subsidiary gross margins of 43–45% expected to sustain, supported by product-mix improvement, higher utilization and export growth.
Geneus Chem partnership: Entry into advanced NOR-HALS products:
CLEAN has entered a 10-year exclusive global manufacturing partnership with Geneus Chem for patented NOR-HALS 378, with initial capacity of 400mtpa and ~INR250mn incremental capex. The management expects FY27 revenue of INR100–130mn, primarily in H2FY27, with cumulative revenue potential of INR2,500mn over the next 3–4 years, supported by guaranteed offtake and margins higher than existing HALS grades.
Kemin agreement: Greater visibility for core business:
CLEAN has signed a minimum5-year supply agreement with Kemin Industries, a customer of 10–12 years, covering BHA, BHT, TBHQ and AP across Kemin’s global manufacturing locations. The management expects offtake to increase by 20–40%, providing greater revenue visibility for the core antioxidant business, with capacity expansion planning already underway to meet incremental demand.
HQ and catechol: Gradual ramp-up expected over next 2-3 years:
CLEAN commissioned its 10,000mtpa HQ-catechol facility in Dec’25 at capex of INR1.5bn, with peak revenue potential of ~INR2.6bn at 80% utilization. Ramp-up is expected over the next 2–3 years, driven by import substitution, exports, captive HQ consumption for TBHQ and initial catechol orders from Chinese customers.
HALS: Ramping up gradually
CLEAN entered HALS in FY23, but the initial ramp-up took longer than anticipated, as manufacturing capacity was established ahead of a fully developed product portfolio and broad-based customer acceptance. The company initially relied heavily on HALS 770, while international customers typically require a wider range of grades for different applications. CLEAN also faced challenges with certain distributors, which did not deliver the expected customer reach, forcing the management to reassess its distribution strategy. Competitive intensity from Chinese manufacturers further added to the challenge.
The company has shifted its focus to customer acquisition in new geographies and product diversification. It has expanded its HALS portfolio to include higher grades, strengthened its distributor network, and pursued approvals with large international customers.
HALS sales volume increased from ~575t in FY24 to ~1,900t in FY25 and 3,300t in FY26. In Q1FY27, volume reached ~1,050t, while exports accounted for nearly half of HALS sales. The management indicated that higher grade products now account for 60% of the portfolio and have achieved quality parity with competitors, supporting the conversion of customer trials into commercial shipments. The company has guided its FY27 revenue at INR2.5-3bn.
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SEBI Registration number is INH000000933
