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On its Investors Day, PCBL’s management gave insights on the company’s ongoing growth plans and long-term opportunities. Key takeaways are – 1) battery chemicals has great potential and is expected to contribute from FY26E/27E, 2) for Aquapharm, the target is to grow each vertical and backward integrate to yellow phosphorous (leading to 15% sales volume CAGR over the next 5 years with margin improvement), 3) growth momentum in carbon black is likely to continue, 4) current expansion plans will not require any leverage due to sufficient cash flow generation, and 5) aim to improve RoE. Taking some of these insights into consideration, and our calculations, we have revised our FY25-27E EPS estimates upwards by ~10-22%. We continue to remain constructive on the name as the stock is trading at ~13x/11x FY26E/27E EBITDA despite the sharp run-up. We expect 28%/26% PAT CAGR over FY24-27E/24-29E (much lower than the company’s target of 37% PAT CAGR over FY24-29E). We maintain BUY with a revised SoTP-based Mar’26 TP of INR 635 (from INR 445 earlier).

* Battery chemicals – not just a narrative: PCBL has finalised 3,000MT of capacity additions for nano silicon materials. For this, the company has indicated a capex to the tune of INR 5.0bn (refer Exhibit 4). We believe that given these materials can replace traditional graphite, increase energy density, and increase lithium storage in graphite anodes (leading to higher charging rates), these products will see strong offtake. Moreover, Kinaltek’s patented technology will make them economically viable. Hence, we expect this business to yield ~INR 1.1bn by FY27E and INR 2.6bn by FY29E (refer detailed calculations below). (Please note for simpler calculations, we are only considering PCBL’s proportion, given PCBL owns a controlling stake; JV-wide numbers will be consolidated and minority interest will be deducted). Although ~ INR 5.0bn JV EBITDA on an INR 5.0bn investment seems too high, we believe it to be possible owing to process break-through

* Aquapharm – on a strong footing: Over FY24-29E, PCBL aims to achieve i) 15% sales volume CAGR in Aquapharm, and ii) 12% sales volume CAGR in carbon black. For Aquapharm, owing to its strong positioning in phosphonates (HEDP, ATMP, etc.), and green chelates (GLDA, MGDA, etc.), we believe the company’s targets are not overambitious. On the margin front, however, we build in margin improvement only to ~17- 18% from ~15% currently (vs. the company’s guidance of ~23-25%

* Carbon black – momentum to continue: In our various previous reports (click here, here, and here) we have highlighted India’s strong positioning in carbon black. In this report, we further indicate that India’s carbon black exports have been growing at a rapid pace over the last 6-7 years while China’s carbon black net exports haven’t seen a significant change over the same period (refer Exhibit 08 and Exhibit 11). Moreover, in our view, the low utilisation of coking coal plants will keep Chinese feedstock (CBO) price elevated compared to CBFS. Hence, although the company might not have shown 12% sales volume CAGR in the past, we build in its target of 12% sales volume CAGR over FY24- 29E as our base case. Two reasons explain low growth in the past – i) low competitiveness before CY16, and ii) limited capacity expansion till FY18

* Carbon black EBITDA/MT as a percentage of Brent crude a better way to assess: We highlight that PCBL’s carbon black EBITDA/MT as % of Brent crude has been 0.2-0.3% (refer Exhibit 14). Building on this and taking in rupee depreciation, we arrive at INR 19/kg EBITDA for the carbon black business in FY29E from INR 16/kg (refer calculations below). We highlight that the company’s guidance of INR 25/kg EBITDA for carbon black includes other income and a possible contribution from power. Overall, we expect carbon black EBITDA to reach INR 13.3bn by FY27E and INR 17.9bn by FY29E (from INR 8.4bn in FY24).

* Raise EPS estimates by 10-22%; maintain BUY: Post better clarity on battery chemicals capacities and ramp-up of Aquapharm, we have revised our FY25/26/27 EBITDA estimates up by 5%/8%/11% and our EPS estimates upwards by 10%/19%/22%. We expect PCBL to register 28%/26% EPS CAGR over FY24-27E/24-29E. We highlight that by FY29E, carbon black and power EBITDA contribution is likely to fall to ~70% (from ~98-100% in FY24E). Further, we move to SoTP valuation to better account for different segments. We maintain BUY with a revised Mar’26 TP of INR 635 (from INR 445 earlier).

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