Neogen Chemicals surges 16% on healthy outlook, up 27% in 2 trading days

Shares of Neogen Chemicals surged 16 per cent to Rs 1,763 on the BSE in Friday’s intra-day trade, zooming as much as 27 per cent in the past two trading days, in an other weak market. At 12:35 pm; the S&P BSE Sensex was down 0.47 per cent or 275 points at 58,187.

Neogen’s business has some seasonal drivers, due to which the company tends to deliver stronger financial performance in the second half of the financial year (October to March). Seasonal variance is driven by strong demand from Europe as orders tend to scale up in October-November and further accelerate from January after the holiday season, according to the company.

Demand for Lithium-based chemicals tends to be strong in Q4 as demand from the HVAC segment, a key usage area, is linked to capital expenditure that enjoys 100 per cent depreciation benefits for airconditioning/cooling machines. The demand from the agrochemicals segment is linked to the crop cycle and is stronger during H2, the company said in earnings presentation.

Neogen Chemicals is India’s one of the leading manufacturers of Bromine-based and Lithium-based specialty chemicals. Its specialty chemicals product offerings comprise organic as well as inorganic chemicals. Its products are used in pharmaceutical and agrochemical intermediates, engineering fluids, electronic chemicals, polymer additives, water treatment, construction and aroma chemicals, flavours and fragrances, specialty polymers, chemicals and vapor absorption chillers — original-equipment manufacturers.

For July-September quarter (Q2FY22), the company recorded accelerated revenue momentum amounting to Rs 113.2 crore, as compared to Rs 82.0 crore in the corresponding quarter last year, higher by 38 per cent. Profit after tax (PAT) grew 51 per cent year on year at Rs 11.2 crore from Rs 7.4 crore in Q2FY21. This was steered by higher capacity utilization led by positive contribution from Phase | expansion, Neogen Chemicals said.

Given the robust demand visibility, the management said it expedited construction at the company’s Phase II expansion project and commissioned it in October 2021. Phase II expansion was earlier planned to come on stream towards the end of the current year.