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Neogen Chemicals Ltd company overview

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Neogen Chemicals Boosts Q1 FY25 Profit to INR 11.5 Cr, Lithium Sales Shine

Neogen Chemicals Boosts Q1 FY25 Profit to INR 11.5 Cr, Lithium Sales Shine

About the Stock

Neogen Chemicals Ltd, established in 1991, is a leading manufacturer of bromine and lithium-based organic and organo-metallic compounds essential for the pharmaceutical, agricultural chemicals, and engineering sectors. Neogen produces sophisticated intermediates for pharmaceuticals, agrochemicals, flavours, and fragrances. As the largest importer of Lithium Carbonate and Lithium Hydroxide for the past three decades, Neogen has cultivated robust relationships with global leading lithium miners and processors, solidifying its position in the market.

Performance Highlights – Q1 FY25

In Q1FY25, Neogen Chemicals Ltd. demonstrated moderate growth and enhanced profitability in its consolidated financial results. The company’s revenues grew by 9%YoY to INR 180 Cr, while EBITDA rose by 10% to INR 30.8 Cr. Neogen maintained a stable EBITDA margin, which increased slightly to 17.1%, representing a 10-basis points improvement compared to the previous year. Notably, the company’s Profit After Tax (PAT) for the quarter reached INR 11.5 Cr, marking a significant 18% increase year-over-year.

Revenue break-up

Revenue break-up (in Cr) Q1 FY24 Q1 FY25 YoY (%)
Organic Chemicals 121 142 17%
Inorganic Chemicals 44 38 -14%
Organic Chemicals Inorganic Chemicals
Bromine prices declined on Y-o-Y basis. Adjusting for this fall in RM prices, the Organic revenue would have been higher by Rs. 14 crores in Q1 FY25. Income from inorganic chemicals would have been higher by Rs. 27 crores, but for the steep decline in the prices of Lithium raw material during the period under review.

Strong revenue performance despite challenging operating scenario. Volume-led growth driven by higher contribution from non-agchem linked products amid weak pricings. A global recovery in agricultural chemicals is anticipated in the latter half of this fiscal year. Strong BuLi Chem performance driven by recovering demand for key application-specific products. Neogen Ionics enhanced revenue with Lithium Salt sales and limited Electrolyte testing. EBITDA improved despite increased employee costs and other expenses related to capacity expansion in Neogen Ionics. Operational efficiencies helped maintain margins at 17.1%, counteracting ongoing pricing pressures across key products. Net profit performance demonstrates robust operational trends, with an additional boost from reduced tax rates. However, as capital expenditure in Battery Chemicals accelerates, both depreciation and interest expenses are anticipated to increase.

Neogen Ionics (Battery Chemicals)

 Neogen Ionics secured financing for most of its capital expenditure, primarily through long-term project finance debt with a 10-year tenure and a grace period. Construction has begun on the new facility, with commercial production expected to start in FY26, aligning with India’s growing battery manufacturing capabilities.
 The company is negotiating long- term electrolyte force agreements with battery manufacturers.Two major producers are set to start operations this year, with several more expected to launch within the next one to two years.
 A dedicated team of 70-80 employees is focused on implementing the battery chemicals project while also managing ongoing production in the first phase.
 The US Inflation Reduction Act and Foreign Countries of Concern policies are expected to accelerate industry momentum. The company has initiated discussions, signed MOUs, and established pricing agreements with international customers.
 Battery chemicals account for approximately 35% of electric vehicle battery costs; advancements in this area are expected to contribute to reducing the overall price of EVs.

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

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.

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