Expanding Lithium Battery Materials Will Secure Global Reach

Key Takeaways

• Expansion into lithium-ion battery materials and global supply diversification is driving strong growth opportunities in electric vehicle and renewable energy storage sectors.
  
• Strategic partnerships and rising custom manufacturing demand are enhancing technological capabilities, supporting sustainable margins and resilient earnings.
  
• Delays in approvals, erratic lithium demand, concentrated product risk, and rising sustainability requirements threaten revenue growth, margin stability, and long-term financial health.

Catalysts

Engages in the manufacture and sale of specialty chemicals in India.

• Neogen is accelerating its entry into lithium-ion battery materials, with large-scale capacity expansions for lithium salts and electrolytes coming online. This positions the company to capture outsized growth driven by the surging electric vehicle and renewable energy storage sectors, directly contributing to long-term revenue and earnings growth.
  
• Global customers are increasingly seeking non-China supply chains for battery chemicals due to stricter localization requirements and new subsidy frameworks in the U.S. and Europe. As one of the very few qualified non-Chinese suppliers, Neogen is attracting interest from global battery and EV makers-potentially enabling robust export-led revenue growth and higher-margin international contracts.
  
• Strong demand visibility is emerging from both EV battery and stationary energy storage markets, with Indian giga-factories (Ola, Exide, Reliance, Tata, etc.) commencing production between 2025–2027 and solar energy storage sharply picking up. This underpins a multi-year volume ramp-up, providing a structural tailwind to Neogen's advanced chemical segment revenues and asset utilization.
  
• Strategic technology partnerships (such as the JV with Morita of Japan) are deepening Neogen's technological moat, enabling backward integration, improved efficiencies, and access to proven production know-how. This should support sustainable margin expansion and enhanced return on capital over the medium
• to long-term.
  
• Secular China Plus One dynamics and stricter environmental compliance requirements globally are prompting pharma, agrochemical, and advanced industrial customers to diversify supply-driving rising recurring business for Neogen's custom synthesis and contract manufacturing business, which stabilizes earnings and increases gross margin resilience.

Neogen Chemicals Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Neogen Chemicals's revenue will grow by 50.2% annually over the next 3 years.
• Analysts assume that profit margins will increase from 4.3% today to 7.0% in 3 years time.
• Analysts expect earnings to reach ₹1.9 billion (and earnings per share of ₹70.86) by about August 2028, up from ₹336.2 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting ₹2.2 billion in earnings, and the most bearish expecting ₹901 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 45.6x on those 2028 earnings, down from 119.5x today. This future PE is greater than the current PE for the IN Chemicals industry at 27.6x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 13.86%, as per the Simply Wall St company report.

Neogen Chemicals Future Earnings Per Share Growth

Risks

• Delays in customer product approvals and plant audits, particularly from major international clients, have slowed the ramp-up of export revenues in battery chemicals (notably lithium salts and electrolytes), risking underutilization of expanded capacity and potentially impacting both revenue growth and EBITDA in the near-to-medium term.
  
• Ongoing softness in lithium chemical demand and price volatility-exacerbated by global tariff and subsidy uncertainties, especially in the US-may result in erratic sales and margin pressures, with significant risk to revenue and net margins if Neogen cannot consistently pass through input cost increases.
  
• The company's substantial capital expenditure programs (₹1,500+ crore) are being financed in part by insurance proceeds and new debt issuances, creating execution risk if project timelines slip or there are further delays in insurance receipts, which could increase interest costs and strain free cash flow and net earnings.
  
• Heavy reliance on a limited product set-mainly bromine and lithium-based compounds-exposes Neogen to concentration risk; any cyclical downturn or increased competition in these segments (including from larger global or low-cost Chinese players) can directly hurt revenue and compress margins.
  
• Intensifying global movement towards greener and more sustainable (biobased or next-gen) chemicals, together with rising regulatory scrutiny and environmental compliance costs in India, could erode demand for traditional specialty chemicals, drive up operating expenses, and threaten Neogen's long-term profitability and investor appeal.

Valuation

• The analysts have a consensus price target of ₹2061.0 for Neogen Chemicals based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₹2630.0, and the most bearish reporting a price target of just ₹1670.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₹26.6 billion, earnings will come to ₹1.9 billion, and it would be trading on a PE ratio of 45.6x, assuming you use a discount rate of 13.9%.
  
• Given the current share price of ₹1415.8, the analyst price target of ₹2061.0 is 31.3% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.