Weak Bromine Prices & Demand Recovery; Valuation Remains Attractive!
Est. Vs. Actual for Q4FY24: Revenue –MISS; EBITDA– MISS; PAT – MISS
Revision in Estimates post Q4FY24 FY25E/FY26E: Revenue: -14%/-8%; EBITDA:-16%/-11%;PAT: -17%/-12%
Recommendation Rationale
Rekindling of Bromine Derivatives Capex: The company has identified 8-9 new bromine derivatives and started the testing and sampling for the same. It has also started exports of clear brine fluids through its subsidiary (Acume Chemicals Pvt. Ltd.). Currently, the company has received approval for samples from 10+ clients. The management anticipates revenue of ~200-300 Cr in FY25 with 15k-20k volumes from the bromine derivatives. The company has incurred a Capex of Rs 110 Cr for Phase 1, with plans to further invest an additional Rs 30-40 Cr in this phase. However, it has temporarily halted the Flame Retardants Capex, likely due to the impact of the weak Chinese economy.
Healthy volume offtake for Bromine but prices mostly remain weak in FY25: Archean is witnessing a strong order book for the year. The company has ramped up supply and is seeing improved uptake from end-user industries such as Agrochem, with the monsoon season approaching, and gradually improving demand from the Pharma sector. The export market is also experiencing steady shipments. Consequently, Archean is optimistic about achieving better business in the bromine segment and anticipates robust volume growth of 30% in FY25, with 10-12,000 units designated for internal consumption in bromine derivatives.
Oren Hydrocarbons: The company expects NCLT approval soon and anticipates a topline of Rs 100 Cr from the subsidiary in FY25. Archean has initiated groundwork to restart the plants. Additionally, Archean will be able to offer other specialized products for oil drilling beyond CBR bromine derivatives.
Sector Outlook: Neutral
Company Outlook & Guidance: The company remains confident in its Bromine Derivatives project and the strategic acquisition of Oren, which is expected to contribute to the topline in FY25. Given its smaller size and large addressable market, ACIL is optimistic about achieving 60-70% utilization from the new derivative plants. The company also anticipates continued strong uptake from the Industrial Salt segment and a recovery in the SOP segment.
Current Valuation: 13x FY26E(Earlier: 14x Sep’26E)
Current TP: Rs 865/share (Earlier: 885/share)
Recommendation: We maintain our BUY rating on the stock
Click here to download Axis Securities Archean Chemical Industries Q4 FY24 Result Update
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