Recommendation from Chemicals Sector

This column gives you scrip chosen by the research team during the fortnight that is fundamentally strong and expected to give good capital appreciation over a time period of 1 year.

ACUTAAS CHEMICALS LTD: MULTI VERTICAL HIGH GROWTH CHEMICALS PLATFORM

HERE IS WHY
✓ Strong growth driving earnings expansion
✓ Entry into high value segments
✓ Margin expansion from better mix

The global specialty chemicals industry continues to benefit from structural tailwinds such as supply chain diversification, increasing outsourcing by global innovators, and rising demand from end-user industries including pharmaceuticals, electronics, and electric vehicles. India is emerging as a key manufacturing hub under the China+1 strategy, supported by cost advantages and improving technical capabilities. Considering these factors, we recommend Acutaas Chemicals Ltd as our Choice Scrip.

Acutaas Chemicals is a leading specialty chemicals company with a strong presence in pharmaceutical intermediates and a growing footprint in specialty chemicals. The company operates across key segments including advanced pharmaceutical intermediates, CDMO (Contract Development and Manufacturing Organization), battery chemicals, and Semiconductor chemicals. Over time, it has built a diversified product portfolio catering to global innovators and generic players. The company is strategically transitioning into a multi-vertical platform with three key growth engines, pharmaceutical intermediates (including CDMO), battery chemicals, and semiconductor chemicals.

Acutaas reported a strong performance in Q3 FY26. Revenue from operations stood at ₹393 crore, registering a growth of 43 per cent YoY. PAT came in at ₹106.2 crore, up 133.7 per cent YoY, with PAT margin at 27 per cent, reflecting strong operating leverage and execution. Operationally, the company continues to strengthen its growth drivers across segments. The CDMO business remains a key contributor, supported by a strong pipeline with multiple products validated and expected to contribute meaningfully from FY27 onwards. The company has guided for CDMO revenue of ₹1,000 crore by FY28, indicating strong visibility in this segment.

In battery chemicals, the company has inaugurated its electrolyte additives facility, with commercial production expected to begin shortly and scale up from FY27. Additionally, expansion into semiconductor chemicals through its South Korea based joint venture provides access to high growth and high margin segments. The company is witnessing encouraging traction in both domestic and global markets for these new verticals. The ongoing capex cycle is likely to act as a key growth catalyst over the medium term. Management has revised its FY26 revenue growth guidance upward from 25 per cent to around 30 per cent, supported by strong Order Book and improving visibility.

On the financial front, the company maintains a strong balance sheet with negligible debt (debt-to-equity of 0.01) and healthy return ratios, with ROCE at 19.9 per cent and ROE at 16 per cent. Over the last three years, it has delivered a sales CAGR of 24.6 per cent and profit CAGR of 30.2 per cent, reflecting consistent growth and improving profitability. From a valuation perspective, the stock is currently trading at a P/E of 65.8x, significantly higher than the industry average of 27.5x and near its 3-year median P/E of 60.4x. The PEG ratio of 2.18 indicates that the stock is priced at a premium to its near-term growth, reflecting strong market expectations around future growth and margin expansion. Acutaas Chemicals is well positioned to benefit from structural tailwinds in specialty chemicals, supported by strong growth in CDMO, expansion into battery and semiconductor chemicals, and improving margin profile. While valuations remain elevated, sustained earnings growth, operating leverage, and execution in new verticals could support further re-rating. Considering these factors, we recommend a BUY.