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This multibagger specialty chemical stock gets 'Buy' tag from HDFC Securities with revised target price

25 Jan , 2022   By : Kanchan Joshi


This multibagger specialty chemical stock gets 'Buy' tag from HDFC Securities with revised target price

Leveraging on its competencies in manufacturing advanced lithium-based salts, specialty chemical manufacturer Neogen Chemicals Ltd (NCL) has announced the establishment of a 250- MT electrolyte formulation capacity, highlighted domestic brokerage and research firm HDFC Securities.


The Indian government has announced a 2 billion production linked incentive (PLI) scheme to support manufacturing and localisation of Advanced Chemistry Cell (ACC) production units, with the aim of localising the supply chain. 


“The company has taken a quantum leap in order to capitalise on the opportunities that lie in lithium-ion batteries and ACC manufacturing. Currently, the company is making these lithium salts for non-electrolyte applications," the note stated.


The brokerage house's buy rating on the multibagger stock from the specialty chemical space comes with a target price of Rs2,150 per share (from Rs1,470 earlier).


Being a highly integrated player, Neogen Chemicals will sell both lithium salts and electrolyte formulation. The HDFC Securities believes that, over the next 5-6 years, the company will prudently invest in augmentation of electrolyte formulation manufacturing and organic chemical business capacities.


Neogen Chemicals manufactures specialty organic bromine-based chemical compounds as well as specialty inorganic lithium-based chemicals compounds. The specialty chemical stock has outperformed by giving multibagger return this year (year-to-date or YTD) so far as the scrip has rallied over 128% in a year's period, whereas it is up 80% in the last six months.


“Ramp-up in the capacity utilisation of the recently-tripled organic chemicals facility at Dahej will fuel near-term growth. EPS will more than triple in FY24E. Beyond that, the electrolyte formulation business will play a pivotal role in continuation of the growth momentum. The company has raised Rs2.25 billion by issuing equity shares on a preferential basis. The equity infusion has helped the company improve its balance sheet," the brokerage note further added.


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