Clean Science and Technology: Ramp-up of new projects drives expansion. Upgrade to ADD with target price of Rs 964
By HDFC SKY | Updated at: Feb 5, 2026 11:21 AM IST
Clean Science and Technology (CSTL) has commercialized Hydroquinone and Catechol plant last week. Investment of further INR1.5bn in water treatment chemical shall be commercialized in Q1FY27. Post commercialization of these projects, the company’s capex cycle will end and it will add ~30% to its existing gross block. The launches of Hydroquinone and Catechol facilities have improved the revenue visibility. In the Hindered Amine Light Stabilisers (HALS), the company has a basket of products to offer which will help further ramp up HALS sales. The company is striving for the import substitution opportunity in HALS and in recently launched performance chemicals. The company is also looking for avenues in export market for HALS for newer and existing molecules. We expect EPS to grow from INR 24.7 in FY26 to INR 43 in FY29 at a CAGR of 20% and RoE improve from 17.3% in FY26 to 19.10 % in FY29, driven by fixed asset turnover. We believe that after completion of its current capex cycle, the company may look upon inorganic expansion, given OCF generation of over INR 3bn per annum. The stock has corrected by ~40% over the past six months and is currently trading at 31x 1-year forward PE and 25x in FY28. We believe that the current valuation is attractive while looking upon the improved revenue visibility and future avenues. We upgrade CSTL to ADD from REDUCE with a price target of INR 964.
Commissioning of non-HALS projects in CFCL
Hydroquinone (HQ) and Catechol Production (performance chemical 1): On 18 Dec, Clean Fino-Chem Ltd (CFCL), a wholly owned subsidiary of the company, commenced commercial production of Hydroquinone (HQ) and Catechol at its dedicated production block. The plant has an installed capacity of 10,000MTPA with a revenue potential of ~INR 3bn. Post this commissioning, the company has become a key domestic manufacturer of HQ and Catechol, enabling import substitution–led demand traction.
Commercialization of HQ further strengthens the performance of chemicals segment, creating cross-selling opportunities with existing MEHQ customers and supporting an improvement in TBHQ market share. Catechol will also be captively consumed for the production of Guaiacol and Veratrole. The company aims to commence customer sampling of end products within December. Revenue ramp-up is over a three-year period, while targeting split of 50% domestic and 50% international.
Water treatment chemical (performance chemical 2): The water treatment project remains on track, with water trials expected to commence in April 2026 and commercial production by June 2026. The company is spending INR 1.5bn for the production block.
Financial summary (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
Disclaimer : This content is only for informational purpose. It does not make any recommendation to act or invest.The recommendation given here is general in nature. Do not make any investment based on this recommendation as it is not based on your unique risk profile and investment objectives. Investment in stocks is subject to market risks and other risks. There is no guarantee of the returns that will be given.
Source: HDFC Securities Institutional Equities
To see full report and disclaimer, click on: https://www.hdfcsec.com/hsl.docs/Clean%20Science%20-%20Update%20-%20Dec25%20-%20HSIE.docx-202512241518483187846.pdf?t=2412202515237965
