Large-Scale LFP Cathode Expansion Will Catalyze Global Advanced Materials Demand

Key Takeaways

• Expansion into specialty materials and first-mover positioning in LFP cathode manufacturing drive global competitiveness and potential for sustained margin improvement.
  
• Strategic partnerships, backward integration, and branded B2C diversification reduce dependency risk, broaden revenue streams, and enhance pricing power.
  
• Dependence on new projects, B2C expansion, and global trends raises execution, competitive, and geopolitical risks that could impact margins, revenue growth, and financial stability.

Catalysts

Manufactures and sells carbon materials and chemicals in India and internationally.

• Ramp-up and commissioning of large-scale specialty carbon black and coal tar pitch expansions (set for Q3-Q4 FY26) will directly drive volume-led revenue growth, higher ASPs, and improved export competitiveness as global demand for advanced materials in EVs, renewables, and electronics accelerates.
  
• First-mover advantage in large-scale LFP cathode active material manufacturing outside China (40,000 TPA plant operational Q3 FY27, with full ramp-up in FY28) positions Himadri to capture significant share of the rapidly growing global lithium-ion battery supply chain, supporting topline and structural EBITDA margin expansion.
  
• Strategic collaboration with global technology partners (e.g., Sicona for silicon-carbon anode technology, IBC for advanced batteries) and backward integration (mining, high purity naphthalene, anthraquinone/carbazole extraction) are expected to unlock further value addition, support sustainable EBITDA growth, and reduce raw material dependency risks.
  
• Diversification into branded B2C segments (Durofresh, specialty tires with Birla Tyres)-leveraging high purity/quality differentiation and latent brand equity-should reduce revenue concentration risk, open up new high-margin verticals, and provide greater pricing power, benefiting future net margins.
  
• Strong export growth supported by global supply chain diversification and 'China+1' strategies (34% of revenue now from exports, increasing international orders in Europe and East Asia) enhances revenue visibility and margin resilience amidst geopolitical tailwinds favoring non-Chinese advanced material suppliers.

Himadri Speciality Chemical Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Himadri Speciality Chemical's revenue will grow by 26.1% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 13.6% today to 10.8% in 3 years time.
• Analysts expect earnings to reach ₹9.8 billion (and earnings per share of ₹19.99) by about July 2028, up from ₹6.1 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 37.3x on those 2028 earnings, down from 41.4x today. This future PE is greater than the current PE for the IN Chemicals industry at 29.4x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 14.14%, as per the Simply Wall St company report.

Himadri Speciality Chemical Future Earnings Per Share Growth

Risks

• Heavy reliance on planned capacity expansions and new ventures (such as specialty carbon black, LFP cathode, Birla Tyres) creates significant execution and ramp-up risk, where any delays or operational hurdles could constrain revenue growth and margin improvement in coming years.
  
• The diversification into B2C tire manufacturing via Birla Tyres, while potentially lucrative, requires significant management focus and skill set shifts; any distraction, inefficiency, or misalignment in this unfamiliar and highly competitive segment could pressure consolidated net margins and return ratios.
  
• Profitability improvements in recent quarters were driven by favorable product mix, operational efficiencies, and raw material trends; if commodity cycles reverse, product mix shifts toward lower-margin offerings, or market competition (including dumping from Russian and Chinese players) intensifies, EBITDA margins and earnings could come under pressure.
  
• Ambitious plans for advancing lithium-ion battery components and scaling new chemical technologies are still at a nascent/pilot stage with substantial future capex; slow customer acceptance, technological obsolescence, regulatory shifts, or global overcapacity in battery materials could derail long-term revenue, delay cash flow generation, or inflate R&D and compliance costs.
  
• The company's growth is partially dependent on export demand and global positioning, exposing it to geopolitical risks (such as potential reversals in China+1 policies, regulatory headwinds, or global economic slowdowns) that could reduce export revenues and create currency or earnings volatility.

Valuation

• The analysts have a consensus price target of ₹500.0 for Himadri Speciality Chemical based on their expectations of its future earnings growth, profit margins and other risk factors.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₹90.8 billion, earnings will come to ₹9.8 billion, and it would be trading on a PE ratio of 37.3x, assuming you use a discount rate of 14.1%.
• Given the current share price of ₹514.8, the analyst price target of ₹500.0 is 3.0% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.