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CFCL – Future growth engine

* CLEAN’s R&D, focused on innovation and sustainability, achieved key milestones in FY24, including the commercialization of HALS series and the development of pharma intermediates. Currently, there are 10 new molecules in progress, which should drive future growth in the pharmaceuticals, polymers, and sustainable agrochemicals segments of the company.

* Clean Fino Chem (CFCL), a wholly owned subsidiary of CLEAN, is scaling up HALS production (current total capacity of 10.5ktpa) and expanding its capacity through Unit-4 and Unit-3 to meet rising global demand in pharmaceuticals, agrochemicals, and polymers. The new plastic application lab would further support HALS growth, while all future capex would happen in CFCL.

* During FY25-27, the company is expected to generate INR6b in FCF and plans to incur a capex of INR5.5b. The stock is currently trading at ~43x FY26E EPS of INR36 and ~32x FY26E EV/EBITDA. We value the stock at 40x Sep’26E EPS to arrive at our TP of INR1,580. R&D forms the cornerstone of CLEAN’s operations

* CLEAN’s R&D has been a key driver of its growth and competitive advantage, with a focus on innovation, sustainability, and catalytic process improvement. It has increased its investments in R&D infrastructure and developed a strong pipeline of new products that position it well to capture future growth opportunities across its product segments.

* In FY24, CLEAN achieved significant R&D milestones with the development and commercialization of the HALS series (770 and 622) for polymer stabilization, alongside new pharmaceutical intermediates like 4- Hydroxy Tempo and DCC, both in high demand for API production and pharmaceutical applications. The increase in R&D expenses (up 7% YoY to INR67m) highlights the management’s commitment to innovation and long-term growth.

* CLEAN is developing over 10 new molecules across key sectors, boosting future growth prospects for the pharmaceuticals and polymers segments. It is focusing on reducing pharma intermediate imports and creating sustainable agrochemical formulations for food security, in line with the Indian government’s "Atmanirbhar Bharat" initiative. CFCL – Dawn of a new era

* CFCL has the largest facility in the company’s history, with a land parcel of 34 acres. CLEAN has invested INR3.4b in CFCL (since Mar’22) funded through internal accruals. The management aims to enhance supply chain stability, optimize costs, and ensure strict product quality control.

* CLEAN is the first Indian company to develop the HALS series and it is scaling up capacity to meet domestic and global demand. The total production capacity of HALS is 10.5ktpa currently, with Cleanlight Stab 770 securing the REACH registration. The Unit-4 greenfield project and Unit-3 expansion will address the growing needs in pharmaceuticals, agrochemicals, and performance chemicals. All future expansions for the company are going to happen in CFCL going forward.

* Global HALS demand (USD1b) is projected to grow at a 10% CAGR by CY30, positioning CLEAN as a key player. CFCL commercialized some HALS products in FY24 (e.g., 770, 622), with more in the pipeline (see exhibit 8) to meet rising demand from polymers, paints, and the automotive industries. The new plastic application lab would also enhance product quality and support future HALS growth.

Valuation and view

* CLEAN is actively pursuing R&D and has entered the HALS series, which has an estimated global market size of USD1b. While the commercial production from CFCL has commenced, the management expects HALS utilization to reach 80% in three years.

* The company is expected to generate INR6b in FCF during FY25-27, with a planned capex of INR5.5b for the same period. The company plans to finance this capex through internal accruals and is projected to maintain a net cash position in the future. The stock is currently trading at ~43x FY26E EPS of INR36 and ~32x FY26E EV/EBITDA. We value the stock at 40x Sep’26E EPS to arrive at our TP of INR1,580.

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