Target: ₹1,014CMP: ₹1,683.20Deepak Nitrite’s ₹11,000-11,500 crore integrated polycarbonate capex is a large strategic bet, but the returns economics look weak. The timing of the capex is unfavourable, as China is adding capacity across polycarbonate, BPA (bisphenol A) and phenol. This is likely to push the value chain into oversupply and increase export pressure into import-dependent markets such as India. We do not see strong economic logic in building the full backward-integrated phenol-BPA-PC chain when China is already oversupplied in phenol and is moving into a large BPA surplus. China’s BPA gross margin is already weak, phenol margin is barely positive, and about 700 kt of new BPA capacity is expected to come online. In this backdrop, importing BPA from China would likely have been more economical than committing large capital to captive BPA and phenol capacity in India. The company’s peak debt is likely to rise to around ₹8,600 crore, changing the stock’s historical low-leverage comfort. Interest costs may not pinch meaningfully for the next two years, but beyond that it is likely to impact P&L materially. Despite an expected 80 per cent increase in EBITDA in FY29F, higher interest costs and depreciation are likely to absorb most of the benefit, resulting in weak EBIT/PBT growth. Given this muted return trajectory, valuation remains lofty; we value the stock at 2x FY28F P/BV to arrive at a lower target price of ₹1,014 (₹1,515 earlier). Retain Reduce rating on the stock.Published on June 2, 2026