Clean Science

Clean Science reported a challenging Q3 FY26, with stand-alone revenue at ₹180 crores, yielding an EBITDA of ₹72 crores (40% margin) and PAT of ₹52 crores (29% margin). On a consolidated basis, revenue moderated by 10% sequentially to ₹216 crores, marking a 21% year-on-year decline primarily driven by volume softness. Consolidated EBITDA and PAT margins stood at 33% and 21% respectively, translating to an EBITDA of ₹72 crores and PAT of ₹46 crores. For the first nine months of FY26, revenue declined by 10% year-on-year, from ₹668 crores to ₹602 crores.

Despite the overall challenging environment, the HALS business demonstrated robust performance, achieving a 55% year-on-year growth in sales. Sequentially, HALS volumes grew by 6.5% to approximately 810 tons, with a blended realization of ₹425 per kg, largely driven by HALS 770. A significant milestone was the achievement of EBITDA breakeven in the subsidiary, Clean Fino Chem Limited, indicating improving operational efficiency and product mix, with HALS 944 contributing nearly 20% to the HALS portfolio.

The company faced significant headwinds from aggressive Chinese competition, particularly in hydroquinone, which led to an all-time low in MEHQ prices. Clean Science was compelled to reduce its MEHQ prices to remain competitive and retain market share. Additionally, tariffs, such as the 55% duty on avobenzone in the United States, severely impacted Indian end-customers of 4-MAP, leading to a dramatic slowdown in demand and the permanent loss of a key customer in China due to backward integration.

Clean Science is progressing with its capex plans, having commercialized its new hydroquinone and catechol plant in December, with customer trials ongoing. This is expected to provide immediate margin benefits for downstream products like TBHQ and Veratrole. The Performance Chemical 2 plant, however, experienced a delay, with commercialization now expected in Q1 FY27, pushed from an earlier target of March to May. The company has infused ₹150 crores into its subsidiary over the last nine months, bringing the total investment to around ₹700 crores.

The sales profile for Q3 FY26 showed Performance Chemicals as the largest segment, contributing 72% of revenue, followed by Pharma Agro at 21%, and FMCG at 5%. The Performance segment was most affected by volume-led declines in MEHQ and BHA. The contribution of the top 4 products to stand-alone revenue declined to 75% from 80% in the previous quarter, indicating a shift in product mix and softer demand for some established products.

Given the fluid market conditions, management deferred specific EBITDA margin guidance, stating it would be appropriate to reassess in the next quarter or two. The company's strategy involves optimizing costs, bringing new products online, and maintaining market share amidst external challenges^🌐. While acknowledging the impact of macroeconomics beyond their control, management expressed confidence in their long-term strategy, supported by a healthy cash flow of ₹450 crores and continued R&D efforts.