Budget 2020

Buy Neogen Chemicals, target price Rs 800: Anand Rathi


Anand Rathi has given a buy rating to Neogen Chemicals with a target price of Rs 800. The share price moved up by 1.50 per cent from its previous close of Rs 610.85. The stock’s last traded price is Rs 620.

Neogen Chemicals Ltd., incorporated in the year 1989, is a Small Cap company (having a market cap of Rs 1450.01 Crore) operating in Chemicals sector.

Financials
For the quarter ended 30-09-2020, the company reported a Consolidated sales of Rs 81.95 Crore, up 7.00 % from last quarter Sales of Rs 76.59 Crore and up 6.31 % from last year same quarter Sales of Rs 77.09 Crore Company reported net profit after tax of Rs 7.21 Crore in latest quarter.

Investment Rationale
The brokerage rolls forward valuation to FY23 and upgrade the stock to a Buy with a higher target of Rs800 (earlier Rs660), at an implied multiple of 27x FY23e EPS and 18x FY23e EV/EBITDA. The company is trying to shorten its working-capital cycle at the new capacities at Dahej. Risks: Slow growth in underlying sectors such as pharma; lengthening of clients’ product lifecycles; high working-capital and debt.


Promoter/FII Holdings
Promoters held 64.3 per cent stake in the company as of Sept 30, 2020, while FIIs held 4.8 per cent, DIIs 16.2 per cent and public and others 14.7 per cent.





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