I-Sec maintains Buy on Archean Chemical Industries, target price Rs 675

ICICI Securities has maintained a buy call on Archean Chemical Industries with a target price of Rs 675. The current market price of Archean Chemical Industries is Rs 612.05 . Archean Chemical, incorporated in 2009, is a Small Cap company with a market cap of Rs 7570.44 crore, operating in Chemicals sector.

Archean Chemical Industries' key products/revenue segments include Salt, Bromine, Potash, Others for the year ending 31-Mar-2024.


Financials
For the quarter ended 31-12-2024, the company has reported a Consolidated Total Income of Rs 251.15 crore, down -.09 % from last quarter Total Income of Rs 251.38 crore and down -40.47 % from last year same quarter Total Income of Rs 421.87 crore. The company has reported net profit after tax of Rs 47.82 crore in the latest quarter.

The company?s top management includes Mr.Ranjit Pendurthi, Mr.Ravi Pendurthi, Mr.Subrahmanyam Meenakshisundaram, Ms.Padma Chandrasekaran, Mr.Chittoor Ghatambu Sethuram, Mr.Kandheri Munaswami Mohandass. Company has PKF Sridhar & Santhanam?LLP as its auditors. As on 31-12-2024, the company has a total of 12 crore shares outstanding.


Investment Rationale
ICICI Securities estimates suggest that ACI?s revenues shall grow at a CAGR of 39% to Rs 20 billion over FY25?27, aided by an uptick in bromine derivative; therefore, bromine volumes. Their assumption does not bake in a rise in bromine prices, yet. Salt volumes will likely normalise post FY26?s transient issues, and some potential success in the SOP floatation process is factored in. Oren is likely to start production, and contribute to growth. The estimates do not factor in the investment in Clas-SiC and Offgrid; and SiC chip production is unlikely before FY28E. The brokerage forecasts EBITDA rising at a CAGR of 46% to Rs 8 billion over FY25?27E with EBITDA margin touching 40% in FY27E. They envisage net profit/EPS growing to Rs 5.6bn/ Rs 45 over FY25?27E, assuming a 49% CAGR for each. ACI will likely continue to be debt free until the SiC chip investment accelerates, probably in FY27; and its pre-tax RoCE is healthy at 26% in FY27E. The company is trading at an undemanding valuation of 12.8x FY27E PE; and 7.4x FY27E EV/ EBITDA. The core business FCF yield (our estimate does not factor in capex in SiC chip plant) is at 6.9% FY27E. The risk is continued weakness in demand for bromine, and a sharp drop in saltprices.
According to I-Sec, the stock has little to lose due to undemanding valuations (12.8x FY27E PE). They have retained the BUY call and target price of Rs 675 (based on 15x FY27E EPS).

Promoter/FII Holdings
Promoters held 53.44 per cent stake in the company as of 31-Dec-2024, while FIIs owned 10.65 per cent, DIIs 22.68 per cent.