Initiating Coverage Report-Archean Chemical Industries Limited - Buy

Unlock 23% Upside: Why Archean Chemicals is a Strong Buy

Target (Rs) Potential Upside % Reco. Price Investment Horizon:
₹ 812
23
₹ 659
12 Months

Why Invest in Archean Chemical Industries?

Strong Bromine Business
Archean Chemical Industries holds a robust market position in bromine, leveraging global relationships, efficient infrastructure, and access to brine reserves in the Rann of Kutch. Amidst China’s production restrictions and increased global demand due to geopolitical tensions, Archean remains a reliable alternative supplier, enhancing its bromine export business.

Industrial Salt Capacity for Growth
As India’s largest industrial salt producer, Archean, with a 3 million MT capacity in 9MFY24, strategically exports all production through proximity to Jakhau Jetty and Mundra Port. The company is set for significant growth in the industrial salt sector, driven by strong demand in Asia, particularly in Japan and China. Expanding its client base and plans to increase manufacturing facilities further support this growth.

Future Growth through Bromine Derivatives
Archean Chemical’s expansion into bromine derivatives, including flame retardants and clear brine fluids, positions it for future success. With an increased bromine capacity and ongoing investments in a new facility in Randedi, Gujarat, the company aims to capture 15% of total sales by FY25E, expanding its product range and driving further growth.

Valuation and Recommendation

Archean Chemical Industries, a leading exporter of bromine and industrial salt, showcases strong financials and growth potential. With an anticipated steady increase in revenue, EBITDA, and profit, the company is viewed as a stable, long-term investment. The current price-to-earnings ratio of 19.7x/13.3x for FY24e/25e EPS estimates suggests an upside potential of 23%, leading to a BUY rating on Archean Chemical Industries Ltd.

Conclusion

In summary, Archean Chemical Industries emerges as a compelling investment option, backed by its dominant position in bromine, substantial industrial salt capacity, and strategic expansion into bromine derivatives. The company’s financial strength and growth prospects make it an attractive choice for investors seeking stable returns in the chemical manufacturing sector.

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