Archean Chemical shares hit all-time high since market debut; gain 55% over IPO price

Shares of Archean Chemical surged over 10% to hit a fresh all-time high of ₹629.25 in intraday trade on the Bombay Stock Exchange (BSE) on Friday amid a spurt in volume trade. Following today’s rally, the share price of the specialty marine chemical manufacturer, which made its stock market debut on November 21, 2022, has gained nearly 55% against its initial public offering (IPO) price of ₹407 on the BSE.

On Friday, Archean Chemical shares opened a tad higher at 573.05 against the previous closing price of 571.65 on the BSE. The stock zoomed as much as 10% to hit a new record high of ₹629.25, in an otherwise weak market, amid strong volume trade. As many as 0.93 lakh shares changed hands over the counter on the BSE, as compared to the two-week average volume of 0.26 lakh stocks. The market capitalisation of the smallcap stock surged to ₹7,565 crore. The stock touched its lowest level of ₹440.05 on November 21, 2022.

Finally, the stock settled the day’s trade at ₹614.80, up 7.55% on the BSE. In comparison, the BSE benchmark closed 303 points, or 0.51%, higher at 60,261 levels.

In a boost to the stock, ICICI Securities has initiated coverage on Archean Chemical Industries with a “BUY rating” and target price of ₹760, a potential upside of 33% from Thursday closing price.

“We value the stock at a multiple of 12x FY25E P/E. We like the natural advantage the company enjoys in elemental bromine due to its access to brine reserves, which is difficult to replicate. Further, the bromine business has unique advantages such as value extraction from brine, China’s position as a major buyer (not competitor), rupee depreciation, etc,” the domestic brokerage house said in a report.  

The agency estimates Archean’s EBITDA CAGR to grow at 33.7% over FY22-FY25E driven by EBITDA margin expansion to 51% in FY25E (from 41.3% in FY22) on better product mix. Archean is a net-debt-free company and its return ratios are healthy and sustainable at more than 30%, it added.

The speciality marine chemical manufacturer made a strong debut on the domestic bourses on November 21, with the share price listing at ₹450, a premium of 10.56% against its issue price of ₹407 per share. The strong listing of India's largest exporter of bromine and industrial salt was in line with D-Street expectations as the ₹1,462 crore IPO of the company had received an overwhelming response from investors. The issue was subscribed 32.23 times, led by qualified institutional buyers (QIBs). Ahead of the IPO, the company raised ₹658 crore from 42 anchor investors at ₹407 per equity share. 

The homegrown marine chemical manufacturer intends to use funds raised through its fresh issue for redemption, non-convertible debentures, and general corporate purposes. For the June quarter, the company posted a profit after tax of ₹84.41 crore, while revenue stood at ₹408.82 crore.