“The stock is down c35% from the Aug 2024 peak. We now expect meaningful improvement in company performance aided by the new CEO's strategic initiatives to optimise costs and new growth drivers,” UBS said in its report.

The company guidance is for EBITDA to increase Rs 8-12 billion by FY28, supported by cost optimisation (Rs 1.5-2 billion), volume and margin ramp-up (Rs 3.5-5.5 billion), and capex-led growth (Rs 3-4.5 billion).

The global brokerage firm believes that this range is achievable, considering initial green shoots across chemistries; however, new capex contribution could be lower.

“We expect an EBITDA increase of about Rs 10bn in FY25-28, factoring in: 1) higher end of guidance for fixed cost optimisation and improving capacity utilisation; 2) steady rise in realisation from FY27; and 3) only nominal contribution from new capacity in FY28,” UBS analysts noted.

Further to this, an improvement in MMA volume is expected along with a focus on market creation from geographical diversification, customised shipments, and better pricing.

The gasolinenaphtha spread has been healthy (average $13/barrel) during Q1FY26TD, despite a sharp correction in the crude oil price, and close to the long-term average before Q4 FY22.

While cognizant of volatile spreads, UBS expects strategic initiatives to cushion volume/profitability volatility.

Also read: NSE's valuation jumps 60% with IPO looming: Sources

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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