Impressive HALS Ramp Up
Summary
Clean Science and Technology (Clean) reported results which were in line with our expectations. The management stated that the growth is majorly led by volumes as realisations are steady. Ramp up in HALS segment was impressive with the company clocking in volume of 1,900 tons in FY25 with better realisations than anticipated at ~$5 per kg and total revenue of Rs 800 mn Management commentary on the roadmap for HALS ramp up seemed positive coupled with steady growth expected from base products such as MEHQ and BHA. We fine tune our estimates to factor in better offtake and realisations from the HALS series. We are positive on the company’s growth prospects and capex aimed towards capturing import substitution opportunities. As valuations have turned attractive after the recent correction we upgrade our rating from HOLD to BUY with revised TP of Rs 1,641 at 35xFY27 expected earnings.
Key Highlights and Investment Rationale
Impressive HALS Road Map: The management asserted scaling up of HALS volumes from 1,900 tons in FY25 to close to 10,000 tons in FY28. Revenue scale up for the same would be from Rs 800 mn in FY25 to ~Rs 5.6 bn in FY28 with blended realisations of Rs 580-585 per kg. Volume and revenue target for FY26 has been pegged at 4500 tons and Rs 2.1bn respectively. The management exuded confidence in their strategy of ramping up the HALS series.
Performance Chemicals Capex and HALS: Out of the two Rs 1.5bn performance chemical capex projects one is slated to be commissioned in August 2025 and the next one in February 2026. Clean envisages steady and improving growth for base products and is strategically aiming to improve product mix by selling higher value HALS products like 119 and 944.