Buy Neogen Chemicals, target price Rs 2,076: HDFC Securities

HDFC Securities has a buy call on Neogen Chemicals with a target price of Rs 2,076. The current market price of Neogen Chemicals is Rs 1920.9. Neogen Chemicals, incorporated in 1989, is a Small Cap company with a market cap of Rs 5035.73 crore, operating in the Chemicals sector.

Neogen Chemicals' key products/revenue segments include Organic/Inorganic Heavy Chemicals and Other Operating Revenue for the year ending 31-Mar-2024.

Financials

For the quarter ended 30-09-2024, the company has reported a Consolidated Total Income of Rs 194.15 crore, up 6.96% from last quarter Total Income of Rs 181.52 crore and up 18.67% from last year same quarter Total Income of Rs 163.60 crore. The company has reported net profit after tax of Rs 10.91 crore in the latest quarter.

Investment Rationale
HDFC Securities' BUY recommendation on Neogen Chemicals (NCL) with a target price of Rs 2,076/share is premised on (1) entry into the new-age electrolyte manufacturing business; (2) increasing contribution of the high-margin CSM business to revenue; (3) volume driven growth in legacy business; and (4) improving return ratios, going forward. NCL?s EBITDA/APAT will grow at a CAGR of 32/41% over FY24-30E while RoE will improve from 5.7% in FY24 to 22% in FY30E. Q2 EBITDA was 8% above estimates owing to lower than expected raw material cost while APAT was 13% below the brokerage's estimates owing to higher than expected interest expenses.

Promoter/FII Holdings
Promoters held 51.23 per cent stake in the company as of 30-Sep-2024, while FIIs owned 8.17 per cent, DIIs 22.48 per cent.