Neogen Chemicals Q3 Results Review - Weakness In Base Business Impacts Growth: IDBI Capital

IDBI Capital Report

Neogen Chemicals Ltd.'s delivered subdued financial performance in the quarter. Lower lithium and bromine prices, higher financing and depreciation costs led to lower than expected profitability.

Revenue for Organic chemicals segment declined by 5% YoY while the revenue for the inorganic chemicals segment declined by 30% YoY owing to lower prices of lithium raw material. Traction in the existing business remains below optimum levels.

However, we are sanguine on Neogen Chemicals progress on the battery chemical front with strong capex plans coupled with a top notch technology partner in the form of MUIS.

We lower our profit after tax estimates for FY24/FY25/FY26 by 41%/20%/5%. We maintain our 'Hold' rating on the stock with downward revised target price of Rs 1,385 (Earlier Rs 1,700) and cut target multiple from 50 times to 45 times on FY26 earning per share.

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