Target: ₹1,014
CMP: ₹1,683.20
Deepak Nitrite’s ₹11,000-11,500 crore integrated polycarbonate capital expenditure (capex) represents a significant strategic undertaking; however, the economics of expected returns appear weak. The timing is also unfavorable as China is expanding its capacity in polycarbonate, bisphenol A (BPA), and phenol. This increase is likely to lead to oversupply within the value chain and apply export pressure on import-dependent markets like India.
The rationale for constructing a fully backward-integrated phenol-BPA-PC chain is questionable, especially considering China’s existing oversupply in phenol and its impending BPA surplus. Current margins for BPA in China are reportedly weak, with phenol margins remaining barely positive. In addition, approximately 700 kilotons (kt) of new BPA capacity is anticipated to come online soon. Under these circumstances, importing BPA from China may prove more cost-effective than investing significantly in domestic BPA and phenol production in India.
The company’s peak debt is projected to escalate to around ₹8,600 crore, altering its historical low-leverage profile. While interest costs may remain manageable for the next two years, they are expected to have a noteworthy impact on the profit and loss statement (P&L) beyond that period. Although an 80% increase in EBITDA is anticipated for FY29F, the rising interest costs and depreciation are likely to neutralize much of this advantage, resulting in limited growth in EBIT and profit before tax (PBT).
Given these subdued return expectations, the stock’s valuation continues to appear high. The company is now valued at 2x the projected book value for FY28, leading to a revised target price of ₹1,014, down from ₹1,515. The recommendation remains to retain a “Reduce” rating on the stock.
Published on June 2, 2026.
