Neogen Chemicals IPO recommendations: Analysts divided on prospects


Last updated on January 12, 2020

Thane-based specialty chemicals player Neogen Chemicals has launched its IPO in the price range of INR212 – 215 per share (head to this page to get more information about the offer). Several brokerage houses and analysts have come out with their research reports regarding the IPO and here is a quick list of Neogen Chemicals IPO recommendations:

Anand Rathi is bullish on the prospects and has recommended investors to subscribe to the IPO. The brokerage house is optimistic about the company’s ability to grow profitably and thus, has justified the company’s demanding multiples. Another positive the brokerage house cited is the company’s forward integration efforts to make advanced intermediates which are otherwise manufactured by customers in-house.

Read Also: Neogen Chemicals IPO Analysis: Should you invest?

Neogen Chemicals IPO recommendations: Neutral and Avoid make to the list

Angel Broking has taken a Neutral stance on the IPO while stating that the company’s focus on high value advanced specialty intermediates has resulted in better margins along with increased profitability. Nevertheless, analyst Kripashankar Maurya feels there is limited upside since the company is operating at optimum level of utilization.

“In terms of valuations, PE works out to be 31x annualized FY19 EPS of `7 post listing (at the upper end of the issue price band) and there is no listed peer available with similar products for comparison. Moreover, NCL is operating at optimum level of utilization and company has not planned any defined capacity expansion in near term. Therefore we believe investors should wait for price discovery before taking any investment decision. Hence, we have NEUTRAL view on the issue,” said Angel Broking’s report.

Choice Broking has recommended investors to stay away from the IPO considering the aggressive pricing. “Based on FY19E and FY20E EPS, the stock is valued at P/E multiples of 32.2 times and 26 times, respectively, which is at a premium to the peer average. However, considering its historical growth profile and proposed expansion activities, we feel the issue is fully priced. Thus, we assign an ‘avoid’ rating for the issue,” said Choice Broking while adding that the listing in T Group will also put some restrictions on price movements.

SAMCO Securities is also not positive and has advised clients to avoid investing in the IPO. “Given its return ratios are lower than the industry or at par, the issue is fully priced. Also, high raw material costs and debt to equity ratio are deterents to company’s operational efficiencies. Investors should avoid,” said Umesh Mehta, head of research at the brokerage house.


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