Clean Science growth hinges on HALS ramp-up amid raw-material and export headwinds

Investment View and Near-Term Outlook

Motilal Oswal Financial Services retained its Neutral rating on Clean Science & Technology in its August 2, 2026 report, despite viewing the company’s longer-term growth levers as intact. Near-term operating conditions remain challenging, as global macroeconomic and geopolitical disruption has created pricing pressure, elevated raw-material costs linked to crude volatility and shipping-vessel shortages that delayed exports.

The broker nevertheless expects the earnings trajectory to improve through process efficiencies, backward integration, the scale-up of Hindered Amine Light Stabilisers (HALS), the ramp-up of the Performance Chemicals-1 plant and commercialisation of the Performance Chemicals-2 plant.

1QFY27 Financial Performance

Clean Science reported consolidated revenue of Rs 2,684 million in 1QFY27, up 11 per cent year on year and broadly in line with Motilal Oswal’s expectation. Performance chemicals accounted for about 81 per cent of quarterly revenue and grew about 21 per cent year on year to Rs 2.1 billion. This growth was partly offset by declines of 17 per cent in Pharma and Agro Intermediates and 23 per cent in FMCG Chemicals.

Adjusted PAT was aided by about 65 per cent growth in other income. The decline in EBITDA reflects the pressure on gross and operating margins despite the increase in revenue.

Operating Conditions and Management Commentary

Management said demand remained steady, although standalone sales were affected by trade-route disruption, lower volumes and an approximately two-week shutdown at a key raw-material supplier. Raw-material availability has improved, but pricing remains high, while end-product prices have stayed stable.

The standalone business has a 65:35 export-to-domestic mix. Management expects supply issues to reduce in 2QFY27, although crude-price volatility remains a concern. Clean Science is a zero-debt company, and exports to the United States remain steady.

HALS Growth and Product Diversification

HALS accounted for about 22 per cent of total sales. Management expects the segment to generate annual revenue of Rs 2.5-3 billion in FY27, equivalent to about 30-35 per cent of overall revenue. It expects sustainable HALS margins of more than 40 per cent, with profitability improving as the product mix shifts towards high-grade products and operating efficiencies increase.

Product concentration has reduced, with the top four legacy HALS products contributing about 60 per cent of quarterly HALS sales, compared with about 85 per cent in 4QFY23. HALS export sales represented about 50 per cent of the segment, while high-grade products accounted for about 60 per cent of volume.

Partnerships and Capacity Expansion

Clean Science’s wholly owned subsidiary has agreed with Switzerland-based Geneus Chem AG to manufacture patented advanced Alkoxy HALS exclusively, with global co-branding and defined marketing geographies. Technology transfer is expected to enable commissioning by 3QFY27, with no technology-transfer fee payable.

The company plans about Rs 2.5 billion of capex for the Geneus project and expects cumulative revenue of Rs 3-3.5 billion over three to four years from sales to Geneus, excluding any additional direct sales.

Clean Science has also signed a minimum five-year supply agreement with Kemin Industries for food and feed chemicals. Performance Chemicals-2 is expected to be commercialised in 3QFY27, with stabilisation in 3QFY27 and 4QFY27 and major revenue expected from 1QFY28. Customer approvals for the hydroquinone-catechol plant have been received, and ramp-up is in progress.

Earnings Estimates and Valuation

Motilal Oswal maintained its FY27E and FY28E earnings estimates overall. Its revised forecasts are as follows:

The broker forecasts FY26-FY28 revenue, EBITDA and PAT compound annual growth rates of 18 per cent, 18 per cent and 21 per cent, respectively. It values Clean Science at 25 times FY28E EPS to derive a target price of Rs 790, compared with the CMP of Rs 734.

Key Risks to the Outlook

• Persistent macroeconomic or geopolitical disruption.
• Volatile crude-linked raw-material costs and continued pricing pressure.
• Export and logistics constraints, including trade-route disruption and shipping-related shortages.
• Delays in new-product launches, plant ramp-up or partnership execution.