Motilal Oswal has given Buy recommendation for Clean Science and Technology recommended buy rating on the stock with a target price of Rs 1700 in its research r with a target price of Rs. 1700 in its research report issued on Aug 30, 2021
Motilal Oswal’s research report on Clean Science and Technology
Clean Science and Technology (CSTL) recently concluded its IPO via an offer for sale of INR15.5b, priced at INR900/share. Post the IPO the promoter shareholding stands at 78.5%. CSTL has emerged as the global leader in most of its product categories on the back of niche product offerings catering to polymer inhibitors / super-absorbents, anti-oxidants for the Food/Feed industry, pharma, home, and personal care. It has further bolstered its value chain through novel manufacturing technology based on green chemistry for one of the key raw materials. CSTL’s streak is driven by its strong R&D capabilities – in both plant technological /engineering development as well as process innovation (based on greener chemistries). This has led to the gross margin expanding to 76% in FY21 from 62% in FY16 (the EBITDA margin expanded from 33% to 50.5% over FY16-21).
In view of its dominating product market share and ability to sustain the highest margins in the industry, we value the company at 50x FY24E EPS (as the company commands ROIC of ~75%) to arrive at Target Price of INR1,700/share. We initiate coverage on CSTL with a Buy rating.