Neogen Chemicals Cuts Revenue Projections After Plant Fire, Brokerage Sees 26% Rise Ahead
Neogen Chemicals
Neogen Chemicals: Management Cuts Revenue Guidance After Plant Fire, But Brokerage Expects 26% Growth
Neogen Chemicals, a key player in the specialty chemicals sector, faced a significant setback today as its stock dropped nearly 10%, closing at Rs 1,623.65.
This decline came after the company revised its revenue guidance downwards in response to a fire at its Dahej plant.
Despite this, brokerage house Nuvama remains optimistic about the company’s future, forecasting a 26% upside from its current price, bolstered by solid long-term prospects and growth in key segments like battery chemicals.
Fire at Dahej Plant: Impact on Operations and Revenue Guidance
The fire at Neogen Chemicals’ multi-purpose plant (MPP3) in Dahej SEZ, which occurred on March 5, 2025, led to extensive damage to both the warehouse and the entire MPP3 structure.
Following the incident, Neogen’s management decided to lower its revenue guidance for FY25-FY26, recognizing the potential financial impact of the disaster.
The fire’s immediate effects have understandably raised concerns among investors, reflected in today’s stock price decline.
However, the company’s management has been quick to reassure investors that the long-term effects of the fire may be limited.
They noted that production at the Dahej facility will be temporarily halted, and efforts will be made to shift production to other plants, including the Patancheru plant, which is currently undergoing an expansion.
This will help mitigate the short-term disruptions caused by the fire. The company is optimistic that it can restart operations within 9 to 12 months, which would provide a pathway for recovery.
Nuvama’s Revised Outlook for Neogen Chemicals
While the fire and the associated revenue guidance reduction have undoubtedly shaken investor confidence, Nuvama remains bullish on Neogen Chemicals’ long-term growth.
The brokerage has revised its target price for the stock down from Rs 2,350 to Rs 2,133, but despite the cut, it still sees a significant potential upside of 26% from the current price.
Nuvama’s analysts are confident that Neogen Chemicals can recover quickly, as the impact of the fire is expected to be relatively short-lived in the broader context of the company’s diverse and resilient business model.
Nuvama’s report on Neogen Chemicals highlights several key factors that support its positive long-term outlook.
Despite the temporary setback at the Dahej plant, the brokerage firm projects strong revenue growth for Neogen Chemicals over the next few years.
Nuvama estimates that the company’s revenue will grow at a compound annual growth rate (CAGR) of 24% between FY24 and FY27, with profits expected to grow by 27% annually during the same period.
This growth will be driven in large part by the strong contributions from Neogen’s other business units, such as BuLi Chem and Neogen Ionics, which are not affected by the fire.
BuLi Chem and Neogen Ionics: Key Growth Drivers
One of the major factors supporting Nuvama’s optimism about Neogen Chemicals is the performance of BuLi Chem and Neogen Ionics.
Both of these divisions are operating unaffected by the fire at the Dahej plant. BuLi Chem, a leading producer of lithium-ion battery chemicals, has seen increasing demand as the world shifts toward sustainable energy solutions, particularly in the electric vehicle (EV) sector.
This trend is expected to accelerate in the coming years as global demand for battery materials increases. Nuvama believes that Neogen’s position in the battery chemicals space will become an important growth driver for the company over the long term.
Similarly, Neogen Ionics, a subsidiary focused on ion exchange resins and related products, is another key growth area that has not been impacted by the fire.
The company’s expertise in ion exchange technologies positions it well to benefit from growing demand in industries like water treatment, pharmaceuticals, and chemicals.
Both BuLi Chem and Neogen Ionics are expected to continue contributing strongly to Neogen’s revenue and profit growth, further strengthening the company’s financial performance.
Strategic Shift in Production
In response to the fire, Neogen Chemicals has already taken steps to minimize the disruption to its operations.
The company will shift the production of select special products from the damaged Dahej plant to other operational units, with customer approval.
This approach will ensure that Neogen’s key products continue to meet market demand while the company works on rebuilding the affected plant.
Additionally, the expansion of the Patancheru facility will help meet production needs during the interim period.
The company expects that rebuilding the Dahej plant and restoring full production capacity will take between 9 and 12 months.
While this is a temporary setback, the company’s ability to manage production shifts and continue operations at its other plants is expected to help it weather the storm.
The ability to leverage its diversified manufacturing footprint will be critical to ensuring that Neogen Chemicals maintains its competitive edge and financial stability during this challenging period.
Stock Performance and Market Sentiment
Despite the strong long-term fundamentals, Neogen Chemicals’ stock has been under pressure in the short term.
Today, the stock closed at Rs 1,623.65, down Rs 179.90, or 9.97%, reflecting investor concerns about the fire’s impact on the company’s immediate financial performance.
The stock’s day high and low were Rs 1,749 and Rs 1,596.35, respectively, with a trading volume of 142,668 shares. This decline is likely tied to market reaction to the fire and the company’s revised revenue guidance.
While the stock’s short-term performance has been negatively impacted, analysts remain optimistic about Neogen’s future.
The company’s strong position in growing markets such as battery chemicals and its diversified business portfolio provide a solid foundation for recovery.
Additionally, once the Dahej plant is rebuilt and operational, the company is expected to return to a growth trajectory.
Final Remarks: A Setback, Not a Setback for Growth
Neogen Chemicals faces a challenging period following the fire at its Dahej plant, but the company’s long-term prospects remain strong.
While the immediate financial impact has led to a reduction in revenue guidance, Neogen’s strategic shift in production, strong contributions from unaffected divisions, and growth potential in emerging markets like battery chemicals give investors reason to remain optimistic.
Brokerage house Nuvama’s target price revision from Rs 2,350 to Rs 2,133 still represents a 26% upside from the current stock price, indicating confidence in Neogen Chemicals’ ability to overcome this setback.
The company’s commitment to rebuilding its operations and capitalizing on growth in key sectors, like lithium-ion battery chemicals and ion exchange resins, positions it well for future success.
As the company navigates the aftermath of the fire, investors should keep an eye on its ability to execute its recovery plan and capitalize on long-term growth opportunities.
