Target: ₹819
CMP: ₹492
IG Petrochemicals Ltd (IGPL), serving as the flagship company within the Dhanuka Group, is the largest manufacturer of Phthalic Anhydride (PAN) in India. The company is one of the most cost-efficient producers of PAN globally.
PAN is a downstream product derived from Orthoxylene (OX), a fundamental petrochemical. Functioning as a versatile intermediate in organic chemistry, PAN plays a pivotal role in the production of Plasticizers, Unsaturated Polyester Resins, Alkyl Resins, and Polyols. Presently, the spread between PAN and OX has narrowed from its decadal average of $150-200 per MT to $90 per MT.
We anticipate that this deviation will normalise, fostering robust growth in gross profit. To further grow its sales, the Company is expanding its PAN capacity by about 24 per cent (from 222,110 MTPA to 275,110 MTPA) as it is working at about 90 per cent capacity utilisation.
We initiate coverage on IGPL with a high conviction Buy rating at 5-year median PE of 8x on FY26E EPS, giving a target price of ₹819, implying an upside of 64 per cent. The new capacity addition of 53,000 MTPA of PAN and improving the spread of PAN & OX will lead to sales growth and improvement in EBITDA margin, leading to strong growth in PAT.