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• Viscose business: Despite a challenging global economic environment, the viscose business has demonstrated a consistent performance, with international VSF average prices reaching $1.51/kg in Q3FY24, marking the lowest in the past three years. The company reported a VSF sales volume of 205 KT, down 2.0% QoQ but up 34% YoY. EBITDA Margins for the viscose business stood at 10.8%, down 122bps QoQ but up 884.1bps YoY, attributed to higher sales volume and reduced input prices. Looking ahead, the management anticipates maintaining steady EBITDA margins. Additionally, a planned capex of INR6,630mn for FY24E, with INR3,940mn already spent in 9MFY24, aims at enhancing capacity and is expected to result in higher volumes. The remaining capex includes INR670mn for capacity expansion and debottlenecking projects, along with INR2,020mn allocated for maintenance capex in Q4FY24E.
• Chemicals business: The chemical business reported revenues of INR19,960mn, flattish QoQ but down 22.7% YoY, primarily attributed to decreased caustic soda realizations. The management foresees stable prices in the foreseeable future. Notably, the brownfield expansion of specialty chemical capacity, focusing on epoxy and curing agents, has doubled to 246KTPA from the previous 123 KTPA, positioning the company to meet growing demand and strengthen its position in India's expanding specialty chemicals market. The company has outlined an overall FY24E capex of INR7,970mn, with INR5,550mn already expended in 9MFY24. Plans include increasing caustic soda capacity from 1,359KTPA to 1,530KTPA by Q3FY25E and expanding chlorine derivatives from 957KTPA to 1,237KTPA by Q4FY26E, involving a capex of INR1,140mn. Additionally, maintenance capex of INR820mn is scheduled for Q4FY24E.
• Paints business to launch in Q4 in phases: The trial run for Birla Opus's 3 plants has commenced and is anticipated to officially begin in Q4. Birla Opus is in the process of implementing an integrated IT infrastructure and application to ensure a seamless order-to-delivery experience. Their painting service, branded as Paint Craft, has successfully completed over 150 sites by December 2023. To support the launch, a robust Supply Chain, Logistics, and Distribution network has been established. The combined capacity of the 6 manufacturing plants is approximately 1,332mn liters, with each trial production plant having a capacity of 200mn liters, and one of the factories equipped with a 30mn liter capacity for solvent paints. The remaining launches is expected in Q1,Q2,Q4 of FY25E. In terms of financial planning, the management has allocated a capex of INR43,420mn for FY24E, with INR34,220mn already spent and the remaining capex expected to be utilized in Q4FY24E.
• Outlook and Valuation: The company anticipates key growth in its paint business, focusing on the decorative paint sector, which is expected to reach INR730 billion by March 2024, with 72-75% in the organized sector. The strong demand for housing, supported by government initiatives, is a major driver, and the company aims to increase premiumization in this segment. In the B2B segment, positive feedback for private label tiles has prompted plans to introduce private label ply and doors to expand the product portfolio. We expect Revenue/ EBITDA to grow at a CAGR of 8.3%/11.1% respectively over FY23-FY26E. We value the company on a SOTP basis to arrive at a TP of INR 2,480, maintaining our rating to ADD. 

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