Neogen Chemicals stock surges 6% after Q1 results; Kotak Institutional lifts target price to ₹2,000

Shares of Neogen Chemicals, a leading manufacturer of bromine and lithium-based specialty chemicals, surged by 6.40% in today's intraday trading, reaching ₹1,651 per share, following the company's decent performance for the quarter ending in June.

Post-market hours on Thursday, the company reported a 9% increase in revenue from operations, reaching ₹180 crore, despite a challenging operating environment. The growth was volume-driven, with higher contributions from non-agrichemical-related products, even amid weak pricing conditions.

Revenue from the organic chemicals segment rose by 17% year-over-year (YoY) to ₹142 crore in Q1. In contrast, revenue from the inorganic chemicals segment decreased to ₹38 crore, down from ₹44 crore, primarily due to a significant decline in lithium raw material prices during the period under review.

The company saw strong performance in BuLi Chems, supported by a recovery in demand for key products catering to specific applications. Additionally, neogen ionics contributed to growth through commercial sales of lithium salts and trial quantities of electrolytes.

EBITDA (earnings before interest, taxes, depreciation, and amortisation) increased by 10% YoY to ₹30.8 crore, with margins maintained at 17.1%, driven by operational efficiencies despite ongoing pricing pressures across key products. Profit after tax grew by 18% to ₹11.5 crore, while earnings per share (EPS) for Q1 FY25 stood at ₹4.35, up from ₹3.92 in Q1 FY24, as per the company's earnings filing. 

Growth opportunities

Management has slightly revised the FY2026 revenue guidance for the base business to ₹9–10 billion, down from the previous range of ₹9.0–10.5 billion. This adjustment, particularly at the upper end, reflects the ongoing softness of demand in the chemical industry.

However, according to Kotak Institutional Equities, the outlook for battery chemicals remains promising. The brokerage highlights strong interest from international customers in Neogen’s salts, where it stands as the most cost-effective non-China supplier. Additionally, the expected commercialisation of at least three major EV battery plants in India—Ola, Exide, and Amara Raja—over the coming quarters further boosts this outlook.

Management anticipates the opportunity to service over 5 GWh of domestic battery capacity by the second half of FY2026. They also foresee export demand for salts surpassing the company’s peak capacity of 5.5 KTPA around the same time. For existing salt contracts, the return on capital employed (RoCE) stands at approximately 20%, with EBITDA margins at 16–17%, it noted. 

Target price

While the battery chemicals opportunity is highly promising, Neogen has also ventured into semiconductors, supplying specialty intermediates as a Tier-2 supplier to international customers. The brokerage notes that this could eventually lead to a larger presence in India. The BuLi Chem acquisition, which includes products for this segment, is already seeing strong traction.

Within the battery space, stationary storage applications present a significant opportunity, especially given the government’s emphasis on renewable energy. Furthermore, with the recent establishment of a Japan subsidiary led by an industry veteran in agrochemicals, Neogen’s CSM business could also gain increased traction.

Given these developments, the brokerage has raised its FY2025E EPS by 7% while keeping the FY2026-27E estimates largely unchanged. Consequently, the target price was revised to ₹2,000 per share, up from ₹1,870.

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