Px hike hasn’t happened and RM Px helped them. Dollar Movement also helped - Augers well for this Qtr growth.
Power Px came down due to coal px coming down and Diwali holidays plant was shut thus the low Power consumption.
Good capital allocation as per queries answered by them on usage of capacity.
All products are commercially approved and they are targeting 3000-4000 Tons of HAL FY26 expected as per management. Last Qtr they closed with a runrate of 135 Tons per month this Qtr we closed with a run rate of 200 tons per month (this was the target by the management which they walked the talk) . But the product mix has also changed. Now Clean science is coming up with an advanced version of HAL which has avg realization of $4.5. Next year they are targeting an avg realization of $6 (33% rise)
Volume guidance is expected to be given in the next year in a Qtrs time. Distribution setup has been recently setup.
Entire growth has come coz of volume. Also a walk the talk is that folks were pessimist about the product approvals but Management has done wonderful and product is now approved. Its all on setting up the distribution for HAL.
1-2 Qtr we will be able to see the HAL margins and picture will become much clearer.
On Inventories and debtor days : Clean science is not stocking very high inventory and apart from these pharma intermediates and perf chemical segment which are coming up. These have sizeable domestic market. So inventory wont pile up too.
I had some concerns here. I was hoping much better result this time or atleast strong indicator for better Q4. None of them came in concall.
HALS is now doing 200 tons per month (600 for Q3) and it was told it contributed 10% of revenue which is 22-23 Cr at approx. 4.5$. For next Qtr, HALS guidance is more or less same- lets say 220*3 = 660 which translate to 25-26cr. 5.5$ was given for FY26 but not for Q4FY25.
so for Q4 - HALS is 25-26 cr. I dont think any rev will come from DHDT in Q4. BHT may be 5 cr.
Rest of products lets say maintain volume. Between Q2 and Q3, I think we were flat there or minor negative since HALS contributed bit more and still we are flat.
so Q4 = 218 cr existing mix + 26 cr HALS + 5 Cr BHT = 249 cr which is 3% Q-oQ.
Bottom-line already improved this Qtr so may not make any further improvement in Q4 so almost flat result or low single digit growth in Q4.
HALS in FY25 is approx 75 cr so non HALS biz is 877 cr. FY25 we will close at 952 Cr
Now lets take full year FY26 -
HALS guidance is 3500 tons at midpoint with 5.5$ range = 135 cr.
BHT is at full capacity 60-80 cr Biz so lets say 30 cr for FY26 = 40 Cr
DHDT is at full capacity 80-90 cr biz and I think it was told in concall 50 cr for FY26 with mainly H2 contributing = 40 cr
performance chemical product with 15o cr capex commissioning in June 25 with rev potential 300 cr. I srsly dont think it will contribute anything in FY26 based on our HALS experience but for sake of bull case - lets say 20 Cr
Water treatment product anyway commissioning in Q426 so no rev there in FY26.
So with all new products total revenue potential is 235 Cr for FY26.
FY25 = 75 cr (HALS) + 877 (Rest of mix) = 952 Cr
We have Vinati staring at us for MEHQ in FY26. Only catalyst I see is China tariff from Trump else I will consider flat rev for FY26 for existing mix. for sake of bull case lets say 950 cr (approx 10% growth) FY26 = 235 Cr (new products) + 950 cr (rest of mix) = 1185 cr
**This is 24% growth YoY. ** Key assumption is 10% growth in existing mix which is very difficult. scaling HALS from 2000 tons to 3500 tons. Picking up 50%+ capacity for new products. This has to be bull case.
for bull case, 25% growth in topline (who knows bottom-line as margin is going to be affected) lets say 20% increase in EPS?
What is price target here? CMP 1430 at 58 PE.
I trimmed my position by 50%. still good % of PF.
Very well put. Yes FY26 will have moderate growth of around 20%. Accelerated growth should come in FY27 only where effect of all latest capex will be seen.
However, bottomline could be better even in FY26 as operating leverage will kicked-in. They told what they are currently doing in quarterly sales, when same reaches to monthly sales they will be breakeven in Clean fino. So, may be at the end of FY26 this can happen which will narrow down losses of subsidiary company.
1 Important thing is - All these assumptions are as per current pricing of chemicals, which they think it is one of the worst since many years. So, even if realization gets improved by 10-20% it can changed the picture entirely.
Key risk for me is Vinati Organics. Although management every time keep saying I haven’t find their product on the ground yet, surely when vinati is doing 500 cr. capex means they might have done adequate trial before commercial production & capex. So, sooner or later Vinati will come in their flagship products which can produce pricing war & Clean science might have to work on lower margin to retain clients. (However Vinati is facing issues in ramp up of MEHQ & even if they start production, they won’t have margins like clean science to produce pricing war unless they have optimum utilization level & have entire downstream chemistry. So that looks like atleast 2 years away)
All agreed but than with 20% growth, how do we value this for FY26? Its trading at 55-60 PE range for a while now. FY27 will also have moderate growth as it takes 2 years minimum for new products to fire at 70% capacity. both new products that are commissioning in FY26 will have moderate contribution in FY27. We are seeing that in HALS.
It is very strong company backed by R&D driven innovation with solid promoter but 2021-22 run to 130PE has ruined it for wealth creation. 1200 is so far bottom only bcz of its run to 2500 2 years back.
100% yes, no concern on the company. Do you feel the valuation has bottomed out? Even now it trades at ~14 P/S for a 16-20% CAGR growth company. Yes, it has a lot of specialty in its product mix so it should get a higher P/S but do you see the current valuation generating sufficient returns at this entry point?
USA has now 20% tariff on China. This is good for cleanscience. Validation is still high but it has history of trading at high valuation. I am willing to pay lilttle bit of premium as I get very strong clean mgmt in return which matters the most in any small cap in my opinion.
Having said that I sold all shares month back at marginal gains which I have started buying now. so far bought 40% of my planned quanities at avg 1170.
I am still not convinced to buy all at this price. I just allocated 40% of the desired quantity at 1170. I will only add remaining if it trades 1100 range which is highly unlikely but I will let it go otherwise.
Below are some key catalyst that need to work in our favor
China continues to face 20% tariff and India does not see any tariff hike in chemical
Vinati struggles with MEHQ and quality is not at par with us
BHT and DHDT gets 60% capacity this year
My expectations are 20% return if my buying avg settles around 1130. This is long term hold for me just bcz promoter and their ability to continue churning new products from R&D. earlier I was bull at 1350 but lately got some reality check in concall and corrected my math which I posted in earlier post. Its decade long play in my opinion. So far they have performed below expectations with respect to HALS and getting us ROCE.
Most probably it won’t. Somewhere I felt I should have gone further at 1150 but this market forces you to buy in small batches as you never know the bottom. It has rebound well.
One thing I am unsure how it will play out is how companies would have stocked supply since Jan given that tariff war was expected to play out. had they imported more from China as it was on first radar from tarriff? that can impact our Q1 but there is also arugment from otherside that can benefit clean science now? One interesting data point - in last Qtr, cleanscience had 14 shipments exported to USA and this Qtr in 2 months, count is only 6. its 25% of business and growing one. part of me is bit bearish on Q4 result and hence waiting.
Disc - invested small volume at 1173. bullish on company, promoters but bit concerned on growth, new products uptake and valuation.
