About PCBL Chemical
Incorporated in 1960 and part of the RP Sanjiv Goenka Group, PCBL Chemical makes rubber and specialty carbon black. The company describes itself as India’s largest and the world’s 7th largest carbon black manufacturer, with 5 locations in India. Its acquisition of Aquapharm Chemicals added specialty water chemicals, including phosphonates, polymers and green chelates, while a joint venture with Kindia is developing nano-silicon products for Li-ion batteries.
Why we recommend PCBL Chemical
- Carbon black leadership and expansion: Installed capacity is 678,000 MTPA for Rubber Black and 92,000 MTPA for Specialty Black. The company plans to increase total capacity to more than 1,000,000 MTPA by FY27, an increase of ~30%.
- Potential for improved carbon black margins: The report links higher blended EBITDA per MT to exports and a richer mix of performance and specialty products. Management has indicated 10% to 12% year-on-year volume improvement and EBITDA of INR 24/kg – INR 25/kg as efficiency, scale and product mix improve.
- Aquapharm broadens the chemicals business: Acquired on 31-Jan-2024, Aquapharm produces specialty water chemicals and has manufacturing plants in India, USA and Saudi Arabia. Management plans to add capacity, including 38,000 MTPA expected to start production in Q1-FY26, and to expand oil & gas chemicals into Europe from its current presence in the US.
- Battery chemicals offer a longer-term growth avenue: PCBL and Kindia hold 51% and 49% of Nanovace Technologies Ltd., respectively. The proposed commercial plant has capacity of 2000 MTPA, with operations expected in FY27/FY28; management has outlined topline potential of INR 2,000 Cr. and EBITDA margins of 50%.
- Power generation contributes alongside core chemicals: The company had installed green power capacity of 122 MW, expected to increase to 134 MW by FY26. Power beyond captive requirements is sold through medium-term agreements; the report notes there are no long-term power purchase agreements for off-take.
Business Overview
PCBL’s existing revenue segments are Carbon Black, Power Sale and Aquapharm Chemicals; Battery Chemicals had yet to add value at the report date. Carbon black products serve tyre and rubber applications, with performance and specialty grades also used in industrial rubber goods, plastics, inks, paints, coatings, adhesives, sealants and batteries. Aquapharm’s products serve water treatment, detergents, paper and pulp, textiles, and oil & gas applications.
For battery chemicals, the JV is developing an additive intended to be mixed with graphite in a battery anode. PCBL plans to invest $44 Mn. over the next 2 years in IPs, a pilot plant for customer approvals and commercial-scale manufacturing. The report notes the commercial plant is planned at 2000 MTPA capacity.
PCBL Chemical Key Financials
| Particulars | FY24(A) | FY25(E) | FY26(P) | FY27(P) | FY28(P) |
|---|---|---|---|---|---|
| Op. Rev. | 6,420 | 8,151 | 9,060 | 10,069 | 11,202 |
| Rev. Growth % | 11% | 27% | 11% | 11% | 11% |
| EBITDA | 1,037 | 1,341 | 1,504 | 1,727 | 1,950 |
| EBITDA % | 16.2% | 16.5% | 16.6% | 17.2% | 17.4% |
| PAT | 491 | 548 | 646 | 788 | 941 |
| PAT % | 7.6% | 6.7% | 7.1% | 7.8% | 8.4% |
| EPS | 13.01 | 14.52 | 17.13 | 20.89 | 24.94 |
| ROCE % | 14% | 13% | 14% | 15% | 16% |
| ROE % | 16% | 16% | 16% | 18% | 18% |
| Debt/EBITDA (x) | 4.65 | 3.59 | 3.11 | 2.64 | 2.19 |
Financial projections and key ratios as presented in the report.
The projections show revenue and PAT increasing through FY28(P), alongside a rise in EBITDA margin from 16.5% in FY25(E) to 17.4% in FY28(P). Debt/EBITDA is projected to decline from 3.59 in FY25(E) to 2.19 in FY28(P).
Valuation and Target Price
The target is based on 1-year forward FY26 PAT of ~INR 646 Cr. and a PE multiple of 27x. Minerva Capital Research Solutions assigns a Buy rating, with a target price of INR 462/- against CMP INR 363.05/- (14-Jan’25) and potential upside of 27%. The report notes further potential from margin improvement in Carbon Black and Aquapharm and commercialization of nano-silicon products for Li-ion batteries from FY28.
- INR 363.05/-
- CMP (14-Jan’25)
- INR 462/-
- Target price
- 27%
- Potential upside
- Buy
- Recommendation
Key Risks
- Capital expenditure and financing: The report identifies debt-funded capex as a risk. It also assumes that annual debt obligations of INR 530 Cr. from FY25 to FY28 will be refinanced at a lower quantum.
- Raw material prices: Carbon Black Feedstock, a derivative product of crude oil, is a key raw material. The report says the risk is mitigated by a pricing formula linked to crude oil prices.
- International competition and supply: The report highlights the threat of carbon black imports from China and the possibility of European Union sanctions on imports from Russia being lifted.
- Cyclical demand: The carbon black business depends on the cyclical tyre industry. Aquapharm also faced stiff competition from China and a decline in demand that affected Q3-FY25 sales volume.
- Expansion execution: Delivery of the proposed capacity expansion over the next 3 to 5 years remains an execution risk.
Management
PCBL is part of the RPSG Group. Mr. Sanjiv Goenka is Chairman & Non-Executive Director. The report describes the company’s corporate governance practices as strong and notes a CARE rating of AA/A1+/Stable dated 09-Oct’24.
Our View PCBL Chemical
PCBL is expanding capacity in carbon black and Aquapharm while preparing a battery chemicals business, with the report expecting sales growth and margin gains from efficiency, scale and product mix. Competition from China and Russia and execution of planned expansion remain important risks. Minerva Capital Research Solutions recommends Buy, with potential upside of 27%.