Prepare a full pitch on a specialty chemicals maker doubling capacity from 40,000 to 80,000 tonnes over three years for Rs 1,200 crore at EBITDA of Rs 45,000 a tonne. Value it at 18 times year-three earnings against today's price and identify the assumption you must defend.

On 80% utilisation in year three, Rudrakshi is worth about Rs 151 a share against Rs 120, and utilisation is the assumption to defend. Year-three EBITDA of Rs 288 crore less Rs 68 crore of depreciation and Rs 54 crore of interest gives EPS of Rs 12.45; 18 times that, discounted three years at 14%, is Rs 151. The price implies 70.5%, a new line running at about 56%. Each 5 points is worth about Rs 16 a share.

With the view and the number, then the reason. A good opening sounds like: long Rudrakshi, worth about Rs 151 against Rs 120, because the market is pricing the new line as if it will run at little more than half its capacity. A pitch is a claim about what the market has wrong, and the interviewer wants that claim in the first thirty seconds, not after the model. The model is the evidence; the variant view is the pitch.

Capacity is easy to forecast because it is concrete and steel. Utilisation is not, because new chemical capacity must be qualified by customers before they buy from it, which takes months. On management's schedule and a utilisation dip while the new line ramps, volume goes from 34,000 to 64,000 tonnes and EBITDA from Rs 153 crore to Rs 288 crore by year three. It is like a restaurant doubling its tables: the rent doubles at once, the diners arrive over months.

Walk down the income statement. EBITDA Rs 288 crore; depreciation Rs 20 crore on the old plant plus Rs 48 crore on the new; interest Rs 54 crore on Rs 600 crore. Profit before tax is Rs 166 crore, after 25% tax Rs 124.5 crore, EPS Rs 12.45; at 18 times that is Rs 224 in year three, and Rs 151 today discounted at 14%. Today the stock trades at 12.0 times current EPS of Rs 9.97, so the market is not paying for the expansion yet.

Run the valuation backwards. At Rs 120, the market is paying for 70.5% utilisation of 80,000 tonnes; if the old line keeps running at 85%, that means the new line runs at only about 56%. The base case of 80% overall needs the new line at about 75%. Every 5 points of utilisation is worth about Rs 16 a share, from Rs 86 at 60% to Rs 184 at 90%. EBITDA per tonne matters too: Rs 40,000 instead of Rs 45,000 cuts the base case to Rs 122. But utilisation has the wider plausible range during a ramp, so it is the number the thesis stands on.

Bring evidence the market does not have or has not weighed: customer qualifications already under way, offtake agreements for part of the new line, and the old line's history of running above 80%. What would make you wrong is a slow qualification process, or new capacity from rivals pushing prices down, which would hit both utilisation and EBITDA per tonne at once. Say the limitation of the project itself: Rs 45,000 of EBITDA a tonne on Rs 3 lakh a tonne of capex is a 15% pre-tax EBITDA return, respectable rather than exceptional, so the expansion creates value mainly if it fills quickly.