On Tuesday, shares of Neogen Chemicals Ltd. were in the spotlight, jumping over 13% to an intraday high of Rs 1,814.85. Just a day earlier, the stock closed at Rs 1,601.30. Investors are excited as brokerage firm Avendus Spark gave a positive outlook on the stock. Avendus Spark has initiated coverage of Neogen Chemicals with a ‘buy’ rating, predicting that the stock could soar by 111% to Rs 3,600 in the next 12 months. Neogen Chemicals has already climbed 22% this year, but according to experts, there’s a lot more room for growth.
Neogen Chemicals Expected to See Massive Growth in the Coming Years
Avendus Spark’s analysis shows that Neogen Chemicals has strong potential for future growth. They project that the company’s stock could even cross the Rs 4,500 mark in three years. Neogen Chemicals’ business in the bromine and lithium supply chains is maturing, but the opportunities remain promising. The company is currently the largest importer of lithium carbonate, which is critical for electric vehicle batteries.
The US government’s Inflation Reduction Act of 2022, which encourages local sourcing and limits dependence on China for the supply chain, puts Indian companies like Neogen Chemicals in a prime position to benefit. Indian firms could see huge opportunities, especially when their competition is mainly limited to players from Japan and Korea.
Financial Outlook and Future Projections
According to Avendus Spark, Neogen Chemicals is expected to increase its net debt from ₹400 crore in fiscal 2024 to over ₹1,700 crore in fiscal 2026. This rise in debt will fund their remaining capital expenditure, which is around ₹1,200 crore, aimed at their electric vehicle business. By fiscal 2026, the company’s debt to EBITDA ratio could peak at 7x before reducing to 4x by fiscal 2027.
For Neogen’s existing business, Avendus Spark estimates 15% CAGR over the period from 2024 to 2028, with EBITDA margins between 18% and 19%. For the company’s electric vehicle battery business, the brokerage firm projects revenue of ₹1,900 crore and EBITDA margins of 22% by fiscal year 2028.
Investment Risks
Though Neogen Chemicals shows significant growth potential, it’s important to remember that investing in the stock market comes with its own risks. Avendus Spark’s projections are based on current market conditions, which can change unexpectedly. Always consult with a financial advisor before making any investment decisions.
(Disclaimer: Stock investments are subject to risks. Always consult with a financial expert before making any investment decisions.)
