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Neogen Chemical reports strong set of numbers

News: Neogen Chemicals reported topline growth of 38% YoY to Rs.113.2 crore against our expectations of Rs.97 crore, led by higher growth in the organic chemical segment (+36% YoY) due to better utilisation of recently commissioned Phase 1 capacity at Dahej and inorganic chemical segment (+63% YoY). OPM for the quarter fell 80 bps YoY to 18.1%, impacted by higher other (+55% YoY) & employee cost (+50% YoY), leading to EBITDA growth of 33% YoY to Rs.20.5 crore against our estimates of Rs.18.5 crore. PAT was up 51% YoY to Rs.11.2 crore owing to lower taxes (22% vs. 28% in Q2FY21) against our estimates of Rs.9.2 crore.

View: Since the company has commissioned both phase 1 and 2 capacity at Dahej, we expect it to report strong growth in the CRAMS and advance bromide intermediates in the coming time. This should augur well for operational growth. Further, foray into lithium electrolyte is likely to offer strong revenue visibility in the long run given that market size is estimated to be Rs.45000 crore, while the company is targeting mere 0.3% market share initially. We expect Neogen’s management capability can assist company to gain meaningful market share in lithium electrolyte in long run and thereby support business performance.