Hold PCBL Chemical: target of Rs 275: ICICI Securities

What happened

ICICI Securities said PCBL Chemical's Q2FY27 focus shifted to profitable growth, letting go of unfavourably priced carbon black demand, causing a 17% year-on-year volume dip. It cut its target price to Rs 275 from Rs 315 and upgraded the rating to HOLD from REDUCE.

Confirmed

Global impact / market context

The volume drop shows PCBL chose profit per kilogram over selling more product at weak prices. The lower target price means the broker expects less profit ahead, so investors should expect slower growth and weigh whether healthy profit per sale offsets shrinking sales.

Analyst inference

Carbon black supply may stay tight because a Russian refinery is affected, which supports pricing while demand stays stable. PCBL expects pricing pass-through, meaning price increases accepted by buyers, to help profitability, with volume recovery possibly clearer from Q3FY27 onwards.

Analyst inference

What to watch

1. ICICI Securities cut FY27E and FY28E EBITDA by 10% and 3.8%, assuming lower volumes, and lowered its target price to Rs 275 based on an unchanged price-to-earnings multiple of 20x FY28E earnings per share. Confirmed
2. Watch whether PCBL's pricing pass-through, meaning customers gradually accepting higher prices in the spot market, actually holds, since the broker expects this to bolster profitability rather than assuming it is already achieved. Proposed
3. Watch carbon black volumes from Q3FY27 onwards, because industry discipline is cited as possibly aiding recovery; if volumes do not return, the lower volume assumptions behind the reduced profit estimates may prove too optimistic. Analyst inference

Evidence

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