Target: ₹800

CMP: ₹707.20

Archean Chemical Industries (ACI) has reported weak Q1-FY25 print with revenue decline across segments, due to lower volumes and realisations in salt and bromine segments. However, it remains confident of delivering good volumes in FY25 – elemental bromine sales (including captive) of 22-25kte (vs 17.5kte in FY24); industrial salt volumes at 4.5 mnte (vs 4.3 mnte in FY24) and ramp-up in second-grade SOP.

Further, it has started receiving approvals for derivative products where it expects volume uptick in H2FY25. Further, it believes India offers certainty of bromine suppliers, and lowers logistical challenges. It also has strong orderbook for FY25 which adds to confidence.

ACI has bought Oren Hydrocarbons via NCLT for ₹76.50 crore, and it expects additional investment of ₹40 crore to restart the business across plants. It has received final approval from NCLT, and is working on restarting two plants with immediate focus on starch and barite. These products cater to oil & gas exploration industry, having synergy with bromine derivative products. ACI estimates revenue to start coming from H2FY25.

We cut our EPS estimates by 7-9 per cent over FY25-26, but increase TP to ₹800 (from ₹720). We have downgraded our rating to Add (from Buy).

Downside risks: Continued weakness in demand for bromine, and a sharp drop in salt prices.

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