Shares of smallcap firm PCBL Chemical (erstwhile PCBL Ltd) rose 2 per cent in Wednesday's trade, taking its winning run to the seventh straight session. The scrip, which has already risen 17.5 per cent during this short period, has potential to rise 45 per cent further, UBS' target price on the stock suggested.
The foreign brokerage assigned a 12-month target price of Rs 600, as it initiated coverage on the carbon black player with a 'Buy' rating, saying PCBL Chemical is transforming into a chemical technology platform and should re-rate ahead.
"During FY24-29, we expect it to deliver 27 per cent earnings CAGR and expand ROCE from 18 per cent to 29 per cent. The base business is a steady compounder and cash generator. We expect growth from diversification into newer phosphonate chemistry will positively surprise the market. Additionally, the sophisticated nano-silicon technology offers substantial optionality, but is not fully appreciated by the market," UBS said on February 3.
On Wednesday, the stock rose 1.5 per cent to hit a high of Rs 413.10. It rose 1.08 per cent on Tuesday and 3.63 per cent on Monday.
"PCBL is making headway in Europe's carbon black industry, after Europe imposed sanctions on Russia, which offers significant growth opportunities. Speciality carbon blacks' rising contribution is aiding margins. We are also seeing early signs of demand revival for Aquapharm products led by stabilisation of raw material prices, which will aid in growth and margins expansion," it said.
UBS said PCBL has substantial embedded optionality through nano-silicon technology, where initial testing data is very promising. Product approval by any battery and EV manufacturer could drive a significant re-rating, it said.
"We initiate coverage on PCBL with Buy and target price of Rs 600. We value PCBL using SOTP on FY27, at 10 times EV/Ebitda for core carbon black, 15 times EV/Ebitda for Aquapharm and price-to-sales of 10 times for the nano-silicon business given its nascent stage and substantial optionality. Among Indian chemical stocks, it remains the cheapest on a PEG basis; we believe it deserves a re-rating given diversification and nano-silicon optionality," UBS said.