The broader markets opened the session on a negative note on the back of weak global cues. However, there has been a decent recovery from the day’s low, with the benchmark index trading 0.29% lower at 17,605 (by 12:06 PM IST), compared to the day’s low of 17,484.3.
Despite a weak sectoral breadth as only the Pharma and FMCG counters are providing investors some relief, a midcap specialty chemicals manufacturer has come on my radar that is luring investors in today’s session. The company is Clean Science and Technology Ltd (NS:) which manufactures fabricated metals & chemicals and has a market capitalization of INR 19,064 crores.
To give a financial background, the company posted a record FY22, clocking the highest ever net revenue of INR 714.86 crores, which is 32.8% up from the previous year and is in line with the 5-year revenue growth of 31.02% (yearly rate). The net income for FY22 also crossed the INR 200-crore mark for the first time ever, at INR 228.49 crores. The growth that the company is reflecting is also making its valuations expensive as the market is willing to pay a good premium over this remarkable growth. The current P/E ratio of the company is 83.44 which is significantly higher than the industry’s average of 13.59. The book value is also quite high, at 24.81 (P/B ratio) which makes it a not-so-cheap stock.
Image Description: Daily chart of Clean Science and Technology showing an inverse H&S pattern breakout
Image Source: Investing.com
However, the stock is still enjoying healthy demand from investors. In today’s gloomy market, the stock rallied over 3.59% to INR 1,860, surging to the highest level in over 4 months. Not just that, the price gain in this gloomy market is more commendable and shows the relative strength of the stock.
The daily chart is also showing the completion of an inverse Head & Shoulders chart pattern, which is quite a good trend-reversal signal and depicts a high probable upside potential. The volume on today’s breakout above the neckline resistance is also backed by the healthy figure of over 308.2K shares so far.
Looking at the potential upside, it might look too optimistic, but the stock could now rally to INR 2,250, according to the inverse H&S pattern. However, it is not a few-week target and the stock might take some months to reach there. On the downside, if Clean Science shares fall below the right shoulder low of INR 1,595, it might change the trend to more of a sideways one.
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