About Company
Incorporated in 2003, Clean Science and Technology Ltd are one of the leading chemical manufacturers globally. It manufactures functionally critical specialty chemicals such as Performance Chemicals (MEHQ, BHA, and AP), Pharmaceutical Intermediates (Guaiacol and DCC), and FMCG Chemicals (4-MAP and Anisole).

Detailed Results:
- The company revenue grew 31% YoY while PAT grew 45% YOY.
- EBITDA margins improved from 42.7% to 46.1% YoY.
- 9M revenues by segment & geography stand at-

Investor Conference Call Highlights
- The company’s manufacturing plants for HALS 701 and 770 in Unit 3 got commercialized in early December.
- The ROCE stands at a very healthy number of 53.6%
- China opening up is a major tailwind for the biz due to their high exposure.
- The pharma biz grew slowly due to lower sales of PBQ.
- EBITDA margins improved due to the correction of raw materials, power & fuel costs, & operational leverage.
- In the MEHQ and BHA, capacity was increased by 50% in the month of April which should take care of 2 years of growth.
- The management states that new growth will come from new segments of product, which is the HALS segment, the new products like PBQ, TBHQ, and other pharma and agro intermediates.
- The company is confident of maintaining its share in the MEHQ segment.
- The company expects to scale up HALS in the coming 6 months & one of its major advantages is its price competitiveness.
- The company expects the utilization to be at least 50-60% in its 770 & 701 plants.
- The company will have to price its chemicals at 5-10% less Vs BASF price to ensure demand for its products.
- The QoQ numbers were lower since Q3 is a leaner quarter with the majority of revenues coming from exports which were also weak due to inventory destocking.
- The company expects to get a small share of HALS chemicals through its better service in the form of specialized packing unlike bigger players & which is bullish since the market itself is expected to grow at 10%.
- The management explains that in FY 24, in the parent company, there will be a small maintenance capex, but the majority of the capex will happen in the subsidiary company, which could be north of INR 150-odd crores.
Analyst’s View
Cleanscience is one of the most talked about recent IPO stocks owing to its strong operational characteristics with a Handsome ROCE of 53% & EBITDA margins > 40%. The company delivered a strong performance YoY with revenue growth of 31% despite a poor export scenario. It remains to be seen whether the company will be able to maintain its growth journey which seems to have been baked in at current valuations, how will it compete with players like BASF in its new chemical like HALS & handle input price & other global economic uncertainties. Nonetheless, given its strong competitive advantage & operational efficiency, it remains an interesting stock to keep on one’s watchlist.