Neogen Chemicals Ltd: Neogen Chemicals Ltd shares are in focus today on Tuesday. The company’s shares rose more than 13% today to an intraday high of Rs 1814.85. Earlier on Monday, the stock closed at Rs 1601.30. There is a good news behind this rise in shares. In fact, brokerage firm Avendus Spark has initiated coverage on this stock with a ‘buy’ rating. Avendus Spark expects Neogen Chemicals shares to reach the level of ₹ 3,600 in the next 12 months. This means a potential increase of 111% from Monday’s closing price. The stock is trading 22% higher so far this year.
what is the detail
Avendus Spark wrote in its note that Neogen Chemicals is likely to cross the ₹4,500 test level in a three-year time frame. Neogen’s current business in the bromine/lithium chain has a relatively small opportunity size and is in the maturity stage. The company is already the largest importer of lithium carbonate. The US government’s Inflation Reduction Act of 2022 has strict local sourcing requirements and specifically seeks to exclude China from the supply chain. As a result, Avendus Spark believes Indian players such as Neogen and Gujarat Fluorochemicals are profitable and their only direct competition is from Japan and Korea.
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Avendus Spark expects Neogen’s net debt to increase from ₹400 crore in fiscal 2024 to over ₹1,700 crore in fiscal 2026 to fund the balance capex of around ₹1,200 crore related to the electric vehicle business. However, peak net debt to EBITDA for Neogen could rise to 7x by fiscal 2026 before falling to 4x in fiscal 2027. For the existing business, Avendus Spark is operating at a compounded annual revenue growth rate (CAGR) of 15% over fiscal 2024-2028 with earnings before interest, tax, depreciation and amortization (EBITDA) margins between 18% and 19%. For the battery business, Neogen is expected to clock revenues of ₹1,900 crore and EBITDA margins of 22% by FY28.
(Disclaimer: The information given here is based on the brokerage firm. Investing in the stock market is subject to risk and please consult your advisor before investing.)
