Archean Chemical top pick for 35% upside
ICICI Securities has maintained its ‘Buy’ rating on Archean Chemical Industries Ltd with a target price of Rs 655. That figure implies roughly a 35 per cent upside from the company’s current market price of Rs 485. The brokerage recently raised its price target from Rs 640 while keeping a valuation multiple of 16 times FY28E EBITDA for the core operations. The firm labeled Archean Chemical its top pick in the speciality chemicals sector, noting a more attractive risk-reward profile than peers.
The market has been tough for chemical stocks recently. ICICI believes Archean is positioned to handle these challenges. The brokerage cites the potential recovery in its core business as a primary reason for the upgrade. Specifically, improvements in bromine production and the normalisation of prices after three weak years are driving this optimism. It also expects the salt business to improve in the second half of FY27. Additionally, SOP and bromine derivative businesses could provide further upside.
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Investors are likely watching the calendar closely, waiting for the H2 FY27 boost the brokerage predicts. The transition from traditional chemicals to advanced materials will be a slow burn, but the catalysts are becoming visible in the roadmap. If the bromine volume ramps up on schedule, the company could see a significant earnings jump before the semiconductor business even contributes a single rupee. The risk here is that the market might move too fast on the semiconductor news, ignoring the immediate need for bromine volume to stabilize cash flows.
Building a semiconductor hub in India
A key part of the investment case is Archean Chemical’s planned compound power semiconductor business. The company is in the advanced stages of setting up a silicon carbide fabrication and ATMP facility. ICICI Securities expects this to be the only integrated facility of its kind in India. The project has received approval under the India Semiconductor Mission, with an estimated project cost of USD 250 million.
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Archean Chemical has also partnered with Clas-SiC in the UK for fabrication technology, Aixtron for silicon carbide epitaxial film deposition equipment and IIT Bhubaneswar for silicon carbide crystal growth. This diverse partnership suggests a robust technical foundation for the plant. The facility aims to bridge the gap in India’s electronics supply chain. It represents a significant capital commitment for the company, signaling a long-term bet on domestic manufacturing.
On the core business, the firm targets an annualised bromine production run-rate of 20-24 kilotonnes at the end of FY27. ICICI estimates bromine revenue could grow at a 37 per cent compounded annual rate and bromine EBITDA at a 42.5 per cent rate over FY26-FY28. Overall earnings are expected to recover sharply from the second half of FY27. EBITDA is estimated to grow at a compounded rate of over 50 per cent between FY26 and FY28. Importantly, its current estimates do not assign any contribution from the power semiconductor business, which could begin generating revenue from FY29.
