The shares of Neogen Chemicals Ltd. were trading at Rs.1764.35, up by 16.5% in today’s trading session.
Neogen’s business has some seasonal drivers, which causes the company to perform better financially in the second half of the fiscal year (October to March). According to the company, seasonal variation is driven by strong demand from Europe, as orders tend to ramp up in October-November and then accelerate after the holiday season.
Demand for lithium-based chemicals is typically high in the fourth quarter, as demand from the HVAC segment, a key usage area, is linked to capital expenditure that enjoys 100% depreciation benefits for airconditioning/cooling machines. The demand for agrochemicals is tied to the crop cycle and is higher in the second half of the year, according to the company’s earnings presentation.
Given the strong demand visibility, management said it has accelerated construction on the company’s Phase II expansion project, which will be completed in October 2021. The Phase II expansion was originally scheduled to begin near the end of the current year.
For the July-September quarter (Q2FY22), Neogen recorded accelerated revenue momentum of Rs 113.2 crore, up 38% from Rs 82.0 crore in the corresponding quarter last year. Profit after tax (PAT) increased 51% year on year to Rs 11.2 crore, up from Rs 7.4 crore in Q2FY21. According to Neogen Chemicals, this was driven by higher capacity utilisation, which was aided by a positive contribution from Phase | expansion.
Neogen Chemicals is one of India’s leading producers of specialty chemicals based on bromine and lithium. Its specialty chemicals product offerings include both organic and inorganic chemicals. Its products are used in pharmaceutical and agrochemical intermediates, engineering fluids, electronic chemicals, polymer additives, water treatment, construction and aroma chemicals, flavours and fragrances, specialty polymers, chemicals, and vapour absorption chillers — OEMs.