Stock Alert: PCBL's EV & Chemical Bets Spark Major Comeback! Experts Say Buy Now?

PCBL's recent Q2 performance saw its core business profitability impacted. However, the company is charting a robust path forward with substantial expansion plans in carbon black, strategic diversification into battery chemicals, and an optimistic outlook for its subsidiary, Aquapharm Chemicals.

Q2 Performance Review

• EBITDA per tonne saw a dip from approximately Rs 20,000 to Rs 16,000.
• Profitability was impacted by factors including market dynamics and operational costs during the quarter.

Aggressive Carbon Black Expansion

• A 90,000-tonne brownfield capacity expansion in Tamil Nadu is expected to be completed this quarter.
• Additionally, a 20,000-tonne Specialty Black Line at Mundra is planned for commissioning by the end of March 2026.
• The company is pursuing a significant greenfield facility of 450,000 tonnes in Andhra Pradesh, with land acquired and environmental clearance pending.
• These expansions aim to achieve a total carbon black capacity of 1 million tonnes by FY28, representing a substantial 25% increase.

Aquapharm Chemicals: Driving Future Growth

• The wholly-owned subsidiary, Aquapharm Chemicals, grew 9% year-on-year in Q2, driven by the home care and water solutions segments.
• Growth was partially offset by weakness in the oil and gas segment and impacts from US tariffs.
• Management forecasts segmental EBITDA to reach Rs 75 crore by the end of FY26, a notable increase from the current Rs 50 crore.
• The company has reportedly received tenders for water purification plants from Saudi Arabia.

Venturing into Battery Chemicals

• PCBL holds a 51% stake in Nonvance, which is establishing a pilot plant for nano-silicon products.
• These products are designed for the anodes of Li-Ion batteries to improve battery range, charging speed, and cost-effectiveness.
• Process patents for nano-silicon in battery applications have been granted in the US, with applications pending in Japan, South Korea, and Europe.
• The company is also exploring new patents for carbon-silicon composites and battery-grade graphite.
• Super conductive grades of carbon black are commanding higher EBITDA/tonne, driven by demand in electronics, energy storage, EVs, and industrial applications.

Outlook and Investor Strategy

• The near-term outlook for carbon black appears positive, supported by the revival in the domestic auto industry.
• Management is confident that margins have bottomed out, despite expected competitive intensity.
• Aquapharm Chemicals is anticipated to be a key growth driver in the near to medium term.
• PCBL has reduced its gross debt by Rs 300 crore in H1FY26, though the net debt-to-equity ratio remains elevated at 1.28x.
• The stock's valuation at 11.9x EV/EBITDA for FY27e is considered reasonable, especially after a significant correction of over 40% in the past year.
• Investors are advised to accumulate the stock in a staggered manner, capitalizing on the company's pivot towards new growth drivers.

Impact

• This news is expected to positively impact PCBL's financial performance and potentially boost its stock valuation.
• It highlights diversification and growth opportunities within the Indian specialty chemical and advanced materials sector.
• Investors may find opportunities for capital appreciation as the company executes its expansion and diversification strategies.
• Impact Rating: 7

Difficult Terms Explained

• EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortisation. It's a measure of a company's operating performance before accounting for financing and non-cash charges.
• YoY: Year-over-Year. This comparison measures performance against the same period in the previous year, indicating growth or decline.
• FY26/FY28/FY27e: Fiscal Year 2026/2028/2027 estimates. These refer to financial periods, with 'e' denoting estimates.
• EV/EBITDA: Enterprise Value to Earnings Before Interest, Taxes, Depreciation, and Amortisation. A valuation multiple used to assess a company's worth relative to its operating earnings.
• Brownfield Expansion: Refers to the expansion of operations at an existing industrial site or facility, often involving upgrading or adding to current infrastructure.
• Greenfield Facility: The construction of entirely new facilities from scratch on a new site, representing a significant investment and expansion.
• Chelates: Compounds that can form a ring structure with a central metal ion. They are used in various applications like water treatment and home care due to their stability and biodegradability.
• WTI: West Texas Intermediate. A specific benchmark grade of crude oil, commonly used as a pricing reference in the global oil market.