HDFC Securities raises target price of this multibagger specialty chemical stock


Leveraging on its competencies in manufacturing advanced lithium-based salts, specialty chemical manufacturer Neogen Chemicals Ltd (NCL) has announced the establishment of a 250- MT electrolyte formulation capacity, highlighted domestic brokerage and research firm HDFC Securities.

The Indian government has announced a 2 billion production linked incentive (PLI) scheme to support manufacturing and localisation of Advanced Chemistry Cell (ACC) production units, with the aim of localising the supply chain. 

“The company has taken a quantum leap in order to capitalise on the opportunities that lie in lithium-ion batteries and ACC manufacturing. Currently, the company is making these lithium salts for non-electrolyte applications,” the note stated.

The brokerage house’s buy rating on the multibagger stock from the specialty chemical space comes with a target price of 2,150 per share (from 1,470 earlier).

Being a highly integrated player, Neogen Chemicals will sell both lithium salts and electrolyte formulation. The HDFC Securities believes that, over the next 5-6 years, the company will prudently invest in augmentation of electrolyte formulation manufacturing and organic chemical business capacities.

Neogen Chemicals manufactures specialty organic bromine-based chemical compounds as well as specialty inorganic lithium-based chemicals compounds. The specialty chemical stock has outperformed by giving multibagger return this year (year-to-date or YTD) so far as the scrip has rallied over 128% in a year’s period, whereas it is up 80% in the last six months.

“Ramp-up in the capacity utilisation of the recently-tripled organic chemicals facility at Dahej will fuel near-term growth. EPS will more than triple in FY24E. Beyond that, the electrolyte formulation business will play a pivotal role in continuation of the growth momentum. The company has raised 2.25 billion by issuing equity shares on a preferential basis. The equity infusion has helped the company improve its balance sheet,” the brokerage note further added.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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