Prabhudas Lilladher has updated its rating for Clean Science and Technology to 'Accumulate' with a price target of ₹827. The brokerage expects earnings to recover, driven by the expansion of Hindered Amine Light Stabilizers (HALS) production and new product launches through fiscal year 2029.
Prabhudas Lilladher has adjusted its outlook on Clean Science and Technology, citing potential for a fundamental earnings turnaround. The brokerage has set a price target of ₹827 for the stock, banking on a period of renewed momentum after the company faced challenges from pricing headwinds in its legacy product lines and delays in capacity expansion. The report projects that sales, EBITDA, and profit after tax will grow at a compound annual growth rate of 23%, 22%, and 27% respectively between fiscal year 2026 and fiscal year 2029.
A key driver of this expected recovery is the scaling of Hindered Amine Light Stabilizers (HALS) production. HALS are additives that protect plastics and coatings from damage caused by light and heat. The company has also secured partnerships to strengthen its position in this market, including a five-year supply agreement with Kemin for antioxidants and a collaboration with Geneus Chem that provides access to advanced NOR-HALS technology. These partnerships are expected to enhance the company's product range and revenue visibility.
Management is also focused on backward integration, particularly in the production of hydroquinone and catechol. By controlling the production of these key raw materials, the company aims to support its profit margins, which have been under pressure across the specialty chemicals sector. Investors are also monitoring the commissioning of the Performance Chemical 2 facility, which is currently planned for the second half of fiscal year 2027. This expansion is considered a major milestone for long-term growth.
While the outlook for the next three years appears optimistic, the company faces specific risks. The brokerage noted that execution risk remains, given the complex nature of the chemical processes involved in the new product lines. Historical performance has also been impacted by operational challenges during previous scale-up phases. Furthermore, the specialty chemicals sector remains sensitive to global raw material price fluctuations and competitive intensity, which can influence margin stability.
At current levels, valuation metrics have moderated to approximately 20 times the estimated earnings for fiscal year 2028. The next major monitorables for shareholders will be the progress of the Performance Chemical 2 facility commissioning, the ramp-up of HALS production, and the ability of the company to maintain margins amidst these operational changes.