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Target: ₹2,871
CMP: ₹1,582.15
Neogen Chemicals might seem to be optically trading at very high valuations, however one needs to seriously consider the long runway the stock has to capture in the EV segment. We are of the firm view that Neogen Chemicals will be able to capture a sizeable market share 30 per cent of the EV electrolytes market since it will have a robust first mover advantage strengthened by its technological tie up with Mitsubishi Ionic Solutions (MUIS).
Once the company starts receiving committed volumes for battery chemicals from domestic battery manufacturers such as Ola Electric, Rajesh Exports, Exide, Amara Raja and others we expect the stock price to witness healthy price appreciation.
Working capital intensity will also moderate with rising contribution from battery chemicals business. We assume equity raising of ₹175 crore in FY26 to balance the capital structure and to fund the battery chemicals business. We are of the firm view that Neogen is a compelling medium term structural growth story from an investment standpoint.
We believe the company can clock in revenue CAGR of 17 per cent from FY24-FY28 in its base business along with strong growth emanating from battery chemicals business. We introduce FY27 and FY28 estimates factoring in growth from the battery chemicals business and upgrade our rating to Buy (from Hold) with a 2-year TP of ₹2,871.
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