Shares of Aether Industries surged 10% to Rs 1,023.15 on the BSE in intraday trade on Thursday after the company said it had signed a letter of intent (LoI) for a strategic supplier and contract manufacturing partnership with a leading US global oilfield services company. The stock was trading near its 52-week high of Rs 1,050, hit on September 19, 2022.

The stock was up 6% at Rs 986 at 12:46 pm, while the S&P BSE Sensex was down 0.12%. Aether Industries is one of India’s leading speciality/fine chemicals manufacturers and a preferred provider of contract research and manufacturing services.

The LoI paves the way for the execution of the Strategic Supply Agreement (SSA) between the two companies within 3 months of the execution of the LoI.

The LoI specified 4 strategic products for new customers that Aether will manufacture as the first set of products in the new partnership. The individual quantities of these 4 products are also specified in the LoI, totalling 1,325 metric tons per month (i.e. approximately 16 KTA or 16,000 metric tons per year). The company said in a press release that the products would be supplied to customers’ global energy and oil and gas locations, including significant supplies within India.

This new partnership’s volume and revenue potential mean a lot to Aether. The first group of 4 products mentioned in the LoI alone has a mature supply potential of more than 1,000 metric tons per month, corresponding to Aether’s annual top-line revenue of more than $3.6 billion or Rs 300 crore. Management expects Aether to realise this initial revenue potential within 1 year of SSA execution.

Analysts at HDFC Securities have a “buy” call on Aether Industries with a target price of Rs 1,180 on growth driven by capacity expansion, advanced R&D capabilities, technocratic management, market leadership in most of its products, strong product pipeline and selection Frame customer base.