Multibagger chemical stock gives over 430% return in 3 years since IPO. Should you buy post Q2?
- Neogen Chemicals shares have given multibagger return of more than 433% since its stock market debut in May 2019
Neogen’s Q2 FY23 operating profit stood marginally better than analysts' estimates on better than estimated gross margins. Inflationary trend in raw material prices was visible during the quarter, specially in the Lithium prices, which have increased by 4-5x over past 12-24 months, said brokerage and research firm Yes Securities.
“Neogen however was able to pass on the increase in raw material costs to most of the customers, thereby protecting Ebitda. At the same time Neogen is also working to improve the product mix and increase the proportion of higher value products,” the note stated.
Neogen is in process of implementing a ₹1,500 mn capex which can potentially add ₹2500-3000 mn in revenue by FY25-26 at full utilization. In addition, the company is actively exploring new CSM opportunities and also manufacturing of electrolyte for Lithium -ion battery cells.
Yes Securities has maintained its Add rating on the chemical stock with a target price of ₹1,675 apiece. “We believe that given Neogen’s unique ability to handle Lithium compounds, it holds immense promise in manufacturing of electrolytes for Li-Ion batteries, where a significant demand is expected to unfold over next decade.”
Another brokerage ICICI Securities is also bullish on the stock as Numbers were solid on a like-to-like basis but below its estimates due to lower than expected growth in the inorganic segment. “The stock appreciated at 55.7% CAGR in the last three years. We retain BUY rating with a 12-month target price of ₹1,680 on the back of better growth outlook from both organic and inorganic segments tracking capex and visibility,” it said.
Commencing operations in 1991, Neogen Chemicals manufactures specialty organic bromine-based chemical compounds as well as specialty inorganic lithium-based chemicals compounds. Neogen Chemicals shares have given multibagger return of more than 433% since its stock market debut in May 2019, whereas the chemical stock is down about 16% in 2022 (YTD) so far.
Neogen has two segments - organic chemicals, inorganic chemicals of which organic chemical constitute around 80% of overall revenue while the rest comes from inorganic chemicals.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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