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Hidden Gem - Neogen Chemicals

ICICIdirect Research 11 Jul 2025 DISCLAIMER

Neogen Chemicals manufactures specialty organic bromine-based chemical compounds as well as specialty inorganic lithium-based chemicals compounds. It has two segments viz. (i) organic chemicals, (ii) inorganic chemicals which find applications in pharmaceutical intermediates, agrochemical intermediates, engineering fluids, polymers additives and water treatment chemicals.

Neogen is among the first few players in India which recognised the potential for battery chemicals (electrolyte and its raw material electrolyte salt) to cater to the huge demand for Lithium-ion batteries.

This visibility is based on GOI’s demand estimates of 160 GWh Lithium Cells by 2030 (from 20 GWh in 2024) with ~60% indigenous battery material.

This is expected to translate into electrolyte demand of >160,000 MT by 2030 as per Neogen estimates. Based on this, electrolyte salt demand could be 15,000 to 22,500 MT           

Banking on this huge potential, Neogen is targeting 32000 MT of electrolytes and 5500 MT of electrolyte salt by the end of FY26.

The company has allocated a total capital expenditure of ₹1,500 crore for its Electrolyte, Salt, and Additives business, of which approximately ₹470 crore has already been invested. The remaining ₹1,100 crore is expected to be capitalized by FY26.

The management projects gradual pick up in capacity utilisation and sales  with optimal ATR of ~2x (subject to stable lithium prices) with operating margins in the range of 16–18%.

Neogen has partnered with Mitsubishi to secure a technology license for producing lithium-ion battery electrolytes. For electrolyte salt it has entered into a joint venture with Japan-based Morita Chemicals, a firm with strong capabilities to compete with Chinese players.

These collaborations are expected to significantly strengthen Neogen’s position in this segment and contribute meaningfully to the company’s overall revenues going forward. We expect gradual improvement in leverage situation post FY27.
Our target price is ₹ 1940 based on 22x FY27E EBITDA of ₹ 306.6 crore.
 

 

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