Neogen Chemicals shares jump 6% after Axis Capital initiates coverage

Neogen Chemicals share price zoomed up to 6.06 per cent at Rs 2,345 per share intraday on the BSE. The stock price of the company moved up after domestic brokerage firm Axis Capita gave a 'Add' rating to the stock and raised its target price to Rs 2,440 per share, reflecting 9 per cent upside to Monday’s closing price. 
 

Neogen is one of India's leading manufacturers of bromine-based compounds, lithium and bromine salts, and Grignard chemicals.

Neogen’s specialty chemicals portfolio includes pharmaceutical intermediates, agrochemical intermediates, engineering fluids, electronic chemicals, polymer additives, water treatment chemicals, construction chemicals, and flavours and fragrances.

 

The brokerage firm said that Neogen's core business is projected to grow at an 18 per cent CAGR over FY24-27, driven by capacity utilisation in organic chemicals and a gradual ramp-up in inorganic chemicals. The company has diversified its revenue streams, from agrochemicals to focus on flavours, fragrances, and pharmaceuticals, analysts said.

“Neogen’s core business is expected to see 18 per cent CAGR over FY24-27E, as it optimises capacity utilisation in organic chemicals, led by advanced intermediates, CSM, and BuLi Chem, while inorganic chemicals see a gradual ramp-up. It has diversified its revenues from agrochemicals (20-25 per cent share) to flavour and fragrances, pharma etc., which will aid growth as it targets optimal utilisation across organic (467 m3 capacity vs 438 m3 earlier) and inorganic capacities,” the brokerage noted in its report.

Neogen saw 25 per cent volume CAGR in organic chemicals over FY 22-24, while EBITDA

CAGR stood at 17 per cent due to sharp pricing correction in bromine and lithium prices.

They also noted that Neogen is well-positioned to capitalise on the growing demand for electrolytes (EL) for EV batteries, thanks to a technology partnership with MUIS and its ability to source lithium from a diverse range of global suppliers. The company plans to commission 30 kt of EL capacity and 5.5 kt for lithium salts by H2 FY26, positioning itself as a key non-China supplier with strong export potential, particularly under the US Inflation Reduction Act.

Further, with funding secured through an Rs 11 billion loan at favourable terms, Neogen anticipates a 35 per cent CAGR in EBITDA from FY 24-30. The salt business is expected to achieve optimal utilisation by FY27, primarily driven by export opportunities, the brokerage said. 

According to Bombay Stock Exchange (BSE), Neogen Chemicals market capitalisation stands at Rs 5,922.69 crore.

At 1:13 PM, the company's shares pared most of its gains and were trading 1.54 per cent higher at Rs 2245.00  per share, while the BSE Sensex was up marginally by 0.06 at 84,977 level.