Hold PCBL Chemical: target of Rs 275: ICICI Securities

Moneycontrol • 1 day ago

Original source

Key Investment Pillars

  • PCBL's focus on profitable growth has led to a decline in carbon black volumes, but an increase in gross profit/kg, indicating a shift towards higher-margin products.
  • The company's efforts to pass on inflation and improve pricing power are expected to bolster profitability, with a potential increase in spot market prices.
  • Aquapharm's performance is improving, with a 10% QoQ/9.7% YoY revenue growth, and the company expects double-digit revenue and EBITDA growth in FY27.
  • PCBL is working on cost-reduction measures, including logistics and other areas, with a target to have an annual savings of INR 2bn over the next three years.

Thesis Validation Checklist

  • Investors should watch for signs of improving profitability, such as increasing gross profit/kg and EBITDA/kg, as well as the company's ability to pass on inflation and improve pricing power.
  • The performance of Aquapharm and its contribution to PCBL's overall revenue and EBITDA growth should be monitored.
  • Any updates on the company's cost-reduction measures and their impact on profitability should be closely watched.
  • The overall demand scenario for carbon black and specialty chemicals, as well as the company's ability to maintain its market share, should be observed.