Neogen Chemicals’ EBITDA Soars to 29.46 Cr fueled by lower input costs

Company Overview:

Neogen Chemicals Ltd is a prominent Indian manufacturer specializing in the production of specialty chemicals, with a focus on bromine and lithium-based chemicals, both organic and inorganic in nature. These chemicals find applications across diverse industries, including pharmaceuticals, agrochemicals, engineering, electronics, polymers, water treatment, construction, aroma chemicals, flavors, and fragrances. The company also offers custom synthesis and contract manufacturing services. In a strategic move, Neogen Chemicals Ltd has recently ventured into the manufacturing of lithium-ion battery materials for energy storage and electric vehicle applications through its subsidiary, Neogen Ionics Ltd. Additionally, the acquisition of BuLi Chemicals India Private Ltd has bolstered their technology platform, particularly in the production of N-Butyl lithium and other organolithium products.

Clientele:

Neogen Chemicals Ltd has a prestigious client base that includes Sun Pharma, Piramal, Hikal, Hetero, Voltas, Divis Laboratories, Solvay, and others. The company operates from four manufacturing sites and two research and development facilities.

Product Portfolio

The company boasts a diverse product portfolio, comprising over 244 products that are distributed not only in India but also in 29 countries, spanning regions such as the United States, Europe, Japan, and the Middle East. The revenue distribution indicates a mix of organic and inorganic chemicals, with a split of 68% and 32%, respectively. In terms of geographical reach, domestic sales account for 52% of revenue, while exports contribute to the remaining 48%.

Q1FY24 results update:

In Q1FY24, Neogen Chemicals Ltd posted a 15% YoY growth in revenue, reaching 170.12 Cr. This was, however, a 17% decline compared to the previous quarter. The revenue mix was predominantly organic, constituting 73%, while inorganic chemicals contributed 27%. In terms of domestic and export sales, the split was 65% and 35%, respectively. EBITDA exhibited a 20% YoY growth, amounting to 29.46 Cr, attributed to lower raw material prices, particularly in lithium, and other input cost efficiencies. EBITDA margins improved by 65 bps to 17.32% YoY. EBIT grew by 18% YoY to 24.54 Cr, accompanied by a 40 bps increase in EBIT margins to 14.4% YoY. PAT performance was moderate, growing by 3% YoY but declining by 20% QoQ to 11.43 Cr, mainly due to higher interest costs and depreciation associated with ongoing expansions. Consequently, PAT margins contracted by 80 bps to 11.43% YoY. 

Conclusion:

Neogen Chemicals Ltd has demonstrated consistent growth and expansion, underpinned by its diverse product portfolio, strategic acquisitions, and foray into cutting-edge technology areas such as lithium-ion battery materials. While the company continues to experience financial growth, its Q1FY24 results reflect the impact of ongoing expansion efforts and external factors affecting profitability. Careful management of input costs and effective project execution will likely be essential moving forward as Neogen Chemicals Ltd navigates its path in the specialty chemicals industry.