Clean Science and Technology (CSTL) has commercialized Hydroquinone and Catechol plant final week. Investment of additional INR1.5bn in water therapy chemical shall be commercialized in Q1FY27. Post commercialization of these projects, the corporate’s capex cycle will finish and it should add ~30% to its current gross block. The launches of Hydroquinone and Catechol services have improved the income visibility. In the Hindered Amine Light Stabilisers (HALS), the corporate has a basket of merchandise to provide which can assist additional ramp up HALS gross sales. The firm is striving for the import substitution alternative in HALS and in not too long ago launched efficiency chemical compounds. The firm can also be on the lookout for avenues in export marketplace for HALS for newer and current molecules. We count on EPS to develop from INR 24.7 in FY26 to INR 43 in FY29 at a CAGR of 20% and RoE enhance from 17.3% in FY26 to 19.10 % in FY29, pushed by mounted asset turnover. We consider that after completion of its present capex cycle, the corporate could look upon inorganic growth, given OCF era of over INR 3bn every year. The inventory has corrected by ~40% over the previous six months and is at present buying and selling at 31x 1-year ahead PE and 25x in FY28. We consider that the present valuation is engaging whereas wanting upon the improved income visibility and future avenues. We improve CSTL to ADD from REDUCE with a price target of INR 964.
Commissioning of non-HALS projects in CFCL
Hydroquinone (HQ) and Catechol Production (efficiency chemical 1): On 18 Dec, Clean Fino-Chem Ltd (CFCL), an entirely owned subsidiary of the corporate, commenced industrial manufacturing of Hydroquinone (HQ) and Catechol at its devoted manufacturing block. The plant has an put in capability of 10,000MTPA with a income potential of ~INR 3bn. Post this commissioning, the corporate has turn into a key home producer of HQ and Catechol, enabling import substitution–led demand traction.
Commercialization of HQ additional strengthens the efficiency of chemical compounds phase, creating cross-selling alternatives with current MEHQ prospects and supporting an enchancment in TBHQ market share. Catechol will even be captively consumed for the manufacturing of Guaiacol and Veratrole. The firm goals to begin buyer sampling of finish merchandise inside December. Revenue ramp-up is over a three-year interval, whereas focusing on cut up of 50% home and 50% worldwide.
Water therapy chemical (efficiency chemical 2): The water therapy undertaking stays on monitor, with water trials anticipated to begin in April 2026 and industrial manufacturing by June 2026. The firm is spending INR 1.5bn for the manufacturing block.
Financial abstract (consolidated)
| INR mn | 2Q
FY26 |
1Q
FY26 |
QoQ (%) | 1Q
FY25 |
YoY (%) | FY24 | FY25 | FY26E | FY27E | FY28E |
| Net Sales | 2,446 | 2,429 | 0.7 | 2,240 | 9.2 | 7,915 | 9,666 | 10,016 | 13,559 | 16,779 |
| EBITDA | 871 | 999 | (12.8) | 947 | (8.0) | 3,321 | 3,876 | 3,859 | 4,949 | 5,738 |
| APAT | 554 | 701 | (20.9) | 659 | (15.9) | 2,440 | 2,644 | 2,628 | 3,366 | 3,915 |
| AEPS (INR) | 5.2 | 6.6 | (20.9) | 6.2 | (15.9) | 23.0 | 24.9 | 24.7 | 31.7 | 36.9 |
| P/E (x) | 39.5 | 36.4 | 36.7 | 28.6 | 24.6 | |||||
| EV/EBITDA(x) | 29.0 | 24.8 | 24.4 | 18.7 | 15.7 | |||||
| RoE (%) | 22.1 | 20.2 | 17.3 | 19.1 | 19.1 |
Source: Company, HSIE Research
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Source: HDFC Securities Institutional Equities
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