Clean Science and Technology Limited — Q2 FY26 earnings call

Call held 6 Nov 2025

Management summary

Clean Science reported a challenging Q2 FY26 with standalone revenue and profit declines attributed to lower sales in established products, competitive intensity from Chinese suppliers, and demand uncertainty. Despite this, EBITDA margins remained resilient. The HALS segment showed strong sequential growth and margin improvement. The company is progressing with new product commercialization, with Performance Chemical 1 expected to launch soon, but management remained cautious on the overall market outlook and declined to provide specific full-year EBITDA guidance.

Highlights

  • Standalone revenue decreased 5% QoQ to INR 206 crores and 8% YoY.

  • Standalone EBITDA at INR 90 crores, down 10% QoQ and 5% YoY, with margins resilient at 44%.

  • Standalone PAT declined 15% QoQ and 4% YoY to INR 65 crores, impacted by forex loss.

  • Consolidated revenue remained steady QoQ at INR 240 crores, with EBITDA of INR 87 crores and PAT of INR 55 crores.

  • HALS segment volumes grew over 25% QoQ to ~260 tons/month, with material margins improving to 35% from 31%.

  • Performance Chemical 1 (10,000 tons capacity) expected to commercialize in November 2025, targeting INR 300 crores revenue by FY28.

  • Management declined to provide full-year EBITDA guidance due to market uncertainties.

Concerns

  • Lower sales volume due to competitive intensity from Chinese suppliers and price decline in end products

  • China market dynamics and potential customer backward integration

Key financials

  1. Standalone Revenue ₹206 Cr -8%YoY
  2. Standalone EBITDA ₹90 Cr -5%YoY
  3. Standalone EBITDA Margin 44% +2%YoY
  4. Standalone PAT ₹65 Cr -4%YoY
  5. Consolidated Revenue ₹240 Cr 0%QoQ
  6. Consolidated EBITDA ₹87 Cr
  7. Consolidated PAT ₹55 Cr

What they filed

Q1 FY27: revenue down 5.9%, net profit down 5.2% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue228 232 245 220 213 −7%185 −20%197 −20%207 −6%
EBITDA95 102 105 101 92 −3%72 −29%88 −16%87 −14%
Net profit67 74 79 77 65 −3%52 −30%58 −27%73 −5%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • HALS Segment (Subsidiary)
    260 tons/month Monthly Run Rate Volumes25% Volume Growth34% Value Growth35% Material Margin25% Capacity Utilization
  • Performance Chemical 1
    10,000 tons Capacity Installed

Guidance & targets

New Product Commercialization

  • Performance Chemical 1 Commercialization New Product Commercialization · November 2025 · High confidence during this month
    We look forward to announce commercialization during this month.

    — Siddharth Sikchi, Executive Director and Promoter

  • Performance Chemical 2 Commercial Production Start New Product Commercialization · June 2026 · High confidence by June
    Water trial. So the plant will be up and ready, water trial should start in April and with the commercial production by June.

    — Siddharth Sikchi, Executive Director and Promoter

Sales

  • Performance Chemical 1 Sales Sales · Q4 FY26 · Medium confidence start seeing in quarter four
    But the offtake and the sales, we should start seeing in quarter four.

    — Siddharth Sikchi, Executive Director and Promoter

Revenue

  • Performance Chemical 1 Full-scale Capacity Revenue Revenue · by FY28 · Medium confidence INR 300 crores
    And on full-scale capacity, we envisage a revenue of about INR300 odd crores with the current prices which are at currently all-time low prices. So we are budgeting in this over 3-year period. So by FY '28, we are budgeting to reaching this revenue potential.

    — Siddharth Sikchi, Executive Director and Promoter

  • Q4 FY26 Contribution from New Products Revenue · Q4 FY26 · Medium confidence Again Q4
    Okay, and secondly when are we expecting a decent contribution from barbituric acid lamivudine intermediate and Performance Chemical One? Again Q4.

    — Siddharth Sikchi, Executive Director and Promoter

Market Mix

  • Performance Chemical 1 Domestic vs International Revenue Market Mix · null · Medium confidence 50-50
    We expect 50-50, 50 would be domestic market and 50 will be international market.

    — Siddharth Sikchi, Executive Director and Promoter

Volume

  • HALS Business Growth Volume · Next quarters · High confidence grow quarter on quarter
    And I think quarter on quarter, we expect this business now to grow because the product is there, pricing is there.

    — Siddharth Sikchi, Executive Director and Promoter

  • Q3 FY26 Standalone Volume Growth Volume · Q3 FY26 · High confidence Not Q3 for sure
    Not Q3 for sure.

    — Siddharth Sikchi, Executive Director and Promoter

  • Q4 FY26 Growth Volume · Q4 FY26 · Low confidence Yes, hopefully yes.
    Got it, so net-net 3Q could be a flat and probably a 4Q with these new products and then some probably the legacy products. So there should be growth in 4Q. Is that the right way to understand? Yes, hopefully yes.

    — Siddharth Sikchi, Executive Director and Promoter

Approvals

  • HALS Large Approvals Approvals · Next 2 quarters · Medium confidence almost most of the large approvals
    And I think in the next, probably two quarters more, I think we should have almost most of the large approvals what we are looking at.

    — Siddharth Sikchi, Executive Director and Promoter

Capacity

  • Performance Chemical 2 Ramp-up Timeline Capacity · from commissioning date · Medium confidence almost 3 years
    Sure. And the time line for ramp-up of both these projects will be the same almost 3 years from the start of date of commissioning? Typically, that's what we are seeing.

    — Siddharth Sikchi, Executive Director and Promoter

Risks & concerns

  • Lower sales volume due to competitive intensity from Chinese suppliers and price decline in end products

    high

    For some customers, a sharp decline in end-product prices amidst competitive intensity from Chinese suppliers led to slowed procurement.

    Management acknowledged

  • China market dynamics and potential customer backward integration

    high

    An FMCG product in China was impacted, with a possibility of customer backward integration leading to permanent volume loss, requiring a relook at strategy.

    Management acknowledged

  • Demand uncertainty in end markets

    medium

    Certain customers are deferring or moderating procurement plans due to demand uncertainty in their end markets.

    Management acknowledged

  • Tariff uncertainty (US) impacting product offtake

    medium

    The BHT product's offtake in the U.S. slowed down due to a 55% tariff.

    Management acknowledged

  • Raw material price volatility (crude-linked)

    medium

    Crude oil-linked raw material prices are decreasing, leading to downward pressure on product prices.

    Management acknowledged

Areas of evasion (1)

  • Full-year EBITDA guidance

Q&A highlights

1 direct, 1 evasive
Subsidiary gross margin decline Direct
For the subsidiary company, the gross margin impact which you are highlighting that is on account of the difference in change in stock. So you know for this quarter there is a lower closing stock. That means we have consumed higher opening stock of the last quarter. That is leading to this. So it's more of an optics. But on our portfolio level, as we mentioned, that the material margins are in the range of 35-odd percent.

Clarifies that the reported margin decline in the subsidiary is an accounting effect (inventory) rather than a fundamental deterioration in product profitability, reassuring investors about underlying business health.

Asked by Arun Prasath

Full-year EBITDA guidance Evasive
I know, Abhijit with these very tricky time situations currently with these tariffs coming up, with all these uncertainties, I think it will be very tricky to mention on EBITDA level at the moment. I would suggest let a quarter or two pass by, let these new facilities also come up. By the time I would also understand the competitive landscape. So I think that would be a better idea to give you a little bit on EBITDA.

Management explicitly declined to provide full-year EBITDA guidance, citing market uncertainties, which signals caution and makes it difficult for analysts to model future performance.

Asked by Abhijit Akela

Competitive intensity and MEHQ insulation Partial
Archit, just to clarify, we are not mentioning about any emerging competition in MEHQ at this stage. Mentioned about FMCG product. One of the customers has now backward integrated and making this product in-house.

Clarified that the competitive pressure and customer backward integration impacting sales is specific to an FMCG product, not MEHQ, which is a key product for the company, thus mitigating concerns about MEHQ's market position.

Asked by Archit Joshi

3 min read 6 chapters

Detailed narrative

Q2 FY26 Performance Overview

Clean Science reported a challenging Q2 FY26 with standalone revenue declining by 5% QoQ to INR 206 crores and 8% YoY, primarily due to lower sales in established products. Standalone EBITDA was INR 90 crores, down 10% QoQ and 5% YoY, though margins remained resilient at 44%, improving 2% YoY due to a favorable product mix. Standalone PAT decreased by 15% QoQ and 4% YoY to INR 65 crores, with the steeper reduction attributed to forex loss. Consolidated revenue remained steady at INR 240 crores QoQ, with EBITDA at INR 87 crores and PAT at INR 55 crores.

HALS Segment Growth and Margin Improvement

The HALS segment demonstrated strong sequential growth, with monthly run rate volumes averaging 260 tons, a 25% increase compared to the previous quarter. Value growth was even higher at 34% QoQ, driven by the introduction of higher grades (HALS 944 and 119). Material margins for the HALS portfolio improved to 35% from 31% due to better raw material costs. The company expects this business to grow quarter-on-quarter and anticipates securing most large global approvals within the next two quarters, aiming to increase its export mix from the current 75-25 domestic-to-export ratio.

New Product Commercialization and Capex Update

Clean Science invested approximately INR 150 crores in its subsidiary CFCL during the first half of the year. Performance Chemical 1, with an installed capacity of 10,000 tons, is undergoing chemical trials and is expected to be commercialized this month (November 2025), with sales anticipated to begin in Q4 FY26. This product is projected to generate around INR 300 crores in revenue at current prices by FY28, with a 50-50 domestic and international market mix. Performance Chemical 2 is slated for water trials in April and commercial production by June, with a ramp-up period of approximately three years.

Market Dynamics and Competitive Landscape

The company faced challenges from competitive intensity from Chinese suppliers, leading to a sharp decline in end-product prices for some customers and subsequent slowdown in procurement. Demand uncertainty in certain end markets also prompted customers to defer or moderate procurement plans. Specifically, an FMCG product in the China market was impacted, with a risk of permanent volume loss if customers have backward integrated. The BHT product also saw reduced offtake in the US due to a 55% tariff.

Geographical Performance and Challenges

The decline in YoY revenue was primarily observed in the U.S. and China. In China, a specific FMCG product was affected, potentially due to customer backward integration, which could lead to a permanent loss of volumes. In the Americas, the decline was attributed to customer-specific volume deferrals and tariff uncertainties. Management indicated that the China market remains 'very tricky' and requires an agile strategy, while the US impact on BHT was due to tariffs.

Margin Resilience and Raw Material Outlook

Despite revenue moderation, standalone EBITDA margins remained resilient at 44%, improving 2% YoY due to a favorable product mix. The subsidiary's gross margin impact was clarified as an 'optics' issue related to inventory changes, with underlying material margins for the portfolio remaining around 35%. Raw material prices, particularly crude oil-linked products, are seen as decreasing, contributing to some price reductions. Management downplayed the impact of recent phenol price increases due to US restrictions, stating it was a temporary spurt.

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