JM Financial says 'Buy' PCBL for 27% upside, lifts target price; details

JM Financial raises PCBL target price: Domestic brokerage JM Financial has raised carbon black manufacturer PCBL target price to Rs 635, from Rs 445 earlier, implying an upside of 26.9 per cent. Although, the brokerage has maintained its ‘Buy’ rating.

“We have revised our FY25-27E earnings per share (EPS) estimates upwards by approximately 10-22 per cent. We continue to remain constructive on the name as the stock is trading at about 13x/11x FY26E/27E Ebitda despite the sharp run-up. We expect 28 per cent/26 per cent profit after tax (PAT) compound annual growth rate (CAGR) over FY24-27E/24-29E (much lower than the company’s target of 37 per cent PAT CAGR over FY24-29E). We maintain ‘Buy’ with a revised sum-of-the-parts (SoTP)-based March 2026 target price of Rs 635 (from Rs 445 earlier),” said Krishan Parwani and Siddhinathan KN, equity analysts at JM Financial said in a note. 

However, on the bourses, the PCBL shares were trading 1.68 per cent lower at Rs 475.45 per share, at 10:40 AM. In comparison, BSE Sensex was trading with slight (0.05 per cent) gains at 81,742.85 levels.

Meanwhile, here are the top factors behind the PCBL target price increase: 

Increased EPS and Ebitda Estimates
 

JM Financial has revised its Ebitda estimates for FY25, FY26, and FY27 upward by 5 per cent, 8 per cent, and 11 per cent, respectively post better clarity on battery chemicals capacities and ramp-up of Aquapharm. 

Earnings per share (EPS) estimates have been adjusted up by 10 per cent, 19 per cent, and 22 per cent for the same years. This adjustment suggests a projected EPS growth rate of 28 per cent for FY24-27 and 26 per cent for FY24-29. 

Diverse revenue streams
 

By FY29, analysts at JM Financial opined, carbon black and power are expected to contribute around 70 per cent of Ebitda, down from nearly 100 per cent in FY24. This shift reflects increased contributions from other business segments.

Battery Chemicals Segment
 

Analysts said PCBL has finalised 3,000 MT of capacity additions for nano silicon materials, with a planned investment of Rs 500 crore. These materials, which can enhance energy density and charging rates in batteries, are expected to generate considerable revenue, potentially Rs 110 crore by FY27 and Rs 260 crore by FY29.

Aquapharm’s Growth 
 

The company aims for a 15 per cent CAGR in Aquapharm sales volume and a 12 per cent CAGR in carbon black sales volume from FY24 to FY29, analysts highlighted. While margins are expected to improve to around 17-18 per cent from the current 15 per cent, this is lower than the company’s guidance of 23-25 per cent, they added.

Carbon Black Outlook

India’s carbon black exports have been rising, while China’s exports have remained stable. JM Financial expects PCBL to achieve a 12 per cent CAGR in carbon black sales volume, driven by increased competitiveness and capacity expansions. 

Analysts highlighted that Carbon black Ebitda/MT, adjusted for Brent crude prices and rupee depreciation, is forecasted to reach Rs 19/kg by FY29, up from Rs 16/kg. 

“We highlight that the company’s guidance of Rs 25/kg Ebitda for carbon black includes other income and a possible contribution from power. Overall, we expect carbon black Ebitda to reach Rs 1,330 crore by FY27E and Rs 1,790 crore by FY29E (from Rs 840 crore in FY24),” analysts at JM Financial said.