Buy Phillips Carbon; tgt of Rs 261: Anand Rathi Securities

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Buy Phillips Carbon; tgt of Rs 261: Anand Rathi Securities

Anand Rathi Securities is bullish on Phillips Carbon Black and has recommended buy rating on the stock with a target of Rs 261 in its February 1, 2011 research report.

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Anand Rathi Securities is bullish on Phillips Carbon Black and has recommended buy rating on the stock with a target of Rs 261 in its February 1, 2011 research report.

"Phillips Carbon Black (PCBL) registered robust 3QFY11 volume growth of 20.4% yoy (7.6% qoq), in line with our estimate. Exports were up 7% yoy and 18% qoq. These and better realization helped PCBL clock-in a healthy 24.3% revenue growth, despite lower contribution from the power segment."

"PCBL's margin of 14.6% in 3QFY11 was in line with that of 3QFY10 (14.7%), but higher 260bps qoq mainly owing to lower employee and raw-material costs. Margin has improved after decline in the past two consecutive quarters. Contribution from Power in the quarter increased 12.9% yoy and 6.7% qoq. At the EBIT level, contribution from Power was up 23.6% yoy to Rs 156 million. 3QFY11 profit was down 10.7%yoy to Rs 300 million, as the company had made provision for a higher tax rate (33% vs. our expected 25%) due to the lower profit from Power and higher deferred tax."

"We lower our FY11e and FY12e EPS 6% and 3.2% respectively on account of higher tax, other adjustments and delay in commencement of the Mundra plant. We maintain Buy on PCBL, while reducing our target price to Rs 261 from Rs 272, based on 1.3x FY12e PBV. The stock trades at 3.8x FY11e and 2.9x FY12e earnings. Risks: higher imports and lower exports of carbon black; lower-thananticipated merchant power rate," says Anand Rathi Securities research report.

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To read the full report click on the attachment