With 131.59% YTD Return Buy This Multibagger Chemical Stock: ICICI Direct

In just one month, the chemical stock Neogen Chemicals has gained almost 32.81 percent. Based on year-to-date or YTD returns, shares of Neogen Chemicals have returned a multibagger of 131.59 percent. Meanwhile, after its initial public offering on the NSE, this stock has surged by more than 540 percent. As a consequence, ICICI Direct, a renowned brokerage company, has recommended buying Neogen Chemicals Limited shares with a target price of Rs. 2160. In the next 12 months, the brokerage expects the stock to rise by 26% from its current market price of Rs. 1721.

The brokerage’s take on Neogen Chemicals Ltd

According to ICICI Direct, "Neogen chemical's board has decided to Issue up to 16.04 lakh equity shares of FV of Rs. 10 each at a price of Rs. 1,402.12 per equity share aggregating up to Rs. 225 crore on a preferential basis. The group of investors remains SBI MF, Axis MF, Plutus Wealth and White oak. The company foresees significant opportunities emerging in advanced intermediates, custom synthesis and advanced chemistry cells for lithium-ion batteries. The objective of this fundraiser is to support the company's growth and to capture the upcoming high potential opportunities in these segments. This should inch up return ratios and thereby valuations in the medium term."

Key triggers for future price performance of Neogen Chemicals Ltd according to ICICI Direct

• Phase 1 and Phase 2 CAPEX at Dahej bodes well for advanced intermediates and custom synthesis revenue growth.
• Higher share of value added business portfolio to improve margins profile of the business.
• Allocation of incremental FCF towards organic/inorganic growth likely to expand return ratios further.

Buy Neogen Chemicals with a target price of Rs. 2160

According to the research report of ICICI Direct, "Neogen has two segments viz. (i) organic chemicals, (ii) inorganic chemicals of which organic chemicals constitute ~80% of overall revenue while the rest comes from inorganic chemicals. The stock appreciated at 90% CAGR in the last two years. We retain a BUY rating on the back of a better growth outlook from the custom synthesis business. We value Neogen Chemicals at 50x P/E FY24E EPS to arrive at a revised target price of Rs. 2160/share (earlier Rs. 1570/share)."

Disclaimer

The stock has been picked from the brokerage report of ICICI Direct Research Desk. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.