Clean Science and Technology Limited (CSTL)

Bottom formed in this mid-cap stock with high ROE?

This post delves into Clean Science and Technology’s product portfolio, financial performance, and the broader landscape of the specialty chemicals market.

Clean Science and Technology Limited (CSTL) is a global leader in eco-friendly catalytic processes for specialty chemicals. Through research, innovation, and operational scale, CSTL is a leading manufacturer with strategic backward integration. With three facilities in Kurkumbh MIDC, Maharashtra, all certified for zero liquid discharge, CSTL maintains high standards in quality, environment, and safety. Dedicated to innovation and sustainability, CSTL aims for financial growth through expansion, automation, and efficient cost management, reflected in its strong balance-sheet with minimal debt and impressive return ratios.

Product and Segment Overview

CSTL is a key player in specialty chemicals, with three major segments: performance chemicals (67% of revenues), pharmaceutical and agriculture intermediates (19%), and FMCG chemicals (14%). Its diverse product portfolio serves industries like personal care, food, agriculture, pharmaceuticals, water treatment, construction, and consumer goods. With robust R&D capabilities, CSTL meets global demand sustainably. Performance chemicals, the largest segment, features flagship products like MEHQ and BHA. Capacities for MEHQ and Guaiacol increased by around 50% in 2022-23. Pharmaceutical and agriculture intermediates include key products like Guaiacol and DCC, while FMCG chemicals feature Anisole and 4-MAP. CSTL’s widely accepted products build trust among clients.


In Q2FY24, the company’s consolidated revenue dropped by 27% to Rs 181.1 crore compared to Rs 247.5 crore in Q2FY23. EBITDA and net profit also declined by 23% and 24%, respectively. Despite lower input prices and an improved product mix, the company achieved a higher EBITDA margin of 42.4%, surpassing the Q2FY23 margin of 39.8%. For H1FY24, consolidated revenue was Rs 369.2 crore, a 23% decrease from H1FY23. EBITDA and net profit fell by 19% and 20%, respectively.

Financial health indicators, including a current ratio of 5.15 and minimal debt, highlight strong liquidity and solvency position. Notable performance metrics include a ROE of 33.2% and ROCE of 44.5%. While the PE multiple of 59 times is lower than the historical median, while it exceeds the industry average of 31.2 times. The EV/EBITDA multiple is 39.3, above the industry median of 15.96.

Sector overview

The global specialty chemicals market is set to achieve a 5.1% CAGR from 2023 to 2030, driven by heightened demand in automotive, construction, and electronics, fuelled by population growth, increased disposable income, and urbanization. The emphasis on sustainable ‘green chemistry’ adds to this growth, highlighting environmental responsibility.

The Asia-Pacific region, with a 48.5% market share in 2022, leads the market, primarily due to economic progress and contributions from China and India. The Middle East and Africa expect a 3.6% CAGR by 2030, driven by rising demand for cosmetic chemicals. Latin America is experiencing significant demand, especially in automotive, transportation, chemical processing, and construction.

In the Indian specialty chemicals market, rapid expansion is projected, reaching USD 64 billion by 2025, constituting 22% of the country’s total chemicals market. Key trends include a focus on research and development for global expansion, the rise of green chemicals supported by government initiatives, the ‘Make in India’ campaign boosting self-reliance, and increased demand for specialty chemicals in various sectors.

The Indian specialty chemicals market exhibits promising growth, propelled by innovation, sustainability, and government initiatives, aligning with global trends.

Business Outlook

In Q2FY24, the market favoured buyers due to persistent destocking and aggressive pricing driven by Chinese overproduction. Low demand in Europe and the US further affected realisation. The company invested Rs 165 crore in capital expenditures during this quarter, mainly directed towards its new subsidiary, Clean Fino-Chem Limited (CFCL). CFCL is expected to start commercial production in Q4FY24, with a total capex of around Rs 300 crore funded internally.

The company also initiated the construction of a chemical plant for pharmaceutical and agriculture intermediates, anticipating a significant contribution to future revenue. Recovery in Guaiacol demand is projected in 2-3 quarters, and destocking normalization is estimated to take a similar timeframe. The company aims for a monthly sales target of 200 tonnes for HALS by the end of FY24, pursuing growth plans and securing its first European container load order for HALS. Despite sound financial metrics, challenges like uncertain demand, destocking, and pricing pressure in the current environment must be considered.


Clean Science and Technology Limited, with its strong financial foundation, commitment to sustainability, and strategic investments, positions itself for continued success in the dynamic landscape of the specialty chemicals industry. As it navigates through challenges and embraces opportunities, CSTL’s journey reflects a commitment to innovation, sustainability, and global leadership.

Disclaimer: This post has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.