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Recommendation Rationale

* Record Q2FY26 Volumes: Sales volume stood at 855 kt, up 13%/8% YoY/QoQ, a record high level despite weak macro and extended monsoon, supported by strong capacity utilisation at the Raipur and Dubai plants.

* EBITDA/t Above $5,000/t: In Q2FY26 EBITDA/t beat the consensus by 8% and stood at Rs 5,228/t, up 187%/12% YoY/QoQ. The QoQ growth by Rs 545/t was driven by: i) Rs 200/t gross-margin improvement (brand premium/value-added mix), ii) Rs 200/t from operating leverage benefits, and iii) Rs 100/t from the absence of the ESOP expense booked in Q1. Management is confident of double-digit CAGR volume growth over the next 3 - 4 years. This upside will drive the operating leverage, which, along with the structural shift toward value-added products, provides visibility for Rs 5,000- 6,000/t EBITDA in the medium term. The long-term target is to reach 10 MT capacity, 70% VAP share and EBITDA/t of Rs 5,500-6,000/t.

* Strategy to Penetrate New Markets – Capacity Expansion: The company targets to expand its current capacity from 4.5 MTPA to 6.8 MTPA by FY28. The expansion will help it cater to the virgin East Indian market and high-margin international markets.

* Outlook & Valuation: The company’s vision is to expand its capacity to 10 MTPA by FY30, providing a growth tailwind in the longer term. Our TP of Rs 1,950/share is based on the Mar’27E EPS using a 1-year forward P/E target of 35x.

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