Shares of specialty chemicals firm Phillips Carbon Black Ltd (PCBL) surged over 10 percent to hit a fresh record high of Rs 498.65 on August 23, a day after the company in its investor presentation emphasised significant growth opportunities. The company highlighted that the global scenario favouring the growth of India’s rubber black industry.
Environmental concerns and high input costs have impacted carbon black production in China impacting their exports. Now, India is emerging as a major exporter to both EU & North America.
Indian carbon black producers are well-equipped to address the EU’s supply gap, said PCBL, adding that there are large opportunities across water treatment, detergent and Oil & Gas products.
Listing its growth strategies, PCBL said it will focus on efficient manufacturing, global supply chain-driven market presence, a well-diversified product portfolio, R&D and innovation, capacity expansion and digitalization & sustainability.
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For the quarter ended June 2024, PCBL reported an 8.1 percent year-on-year (YoY) increase in net profit at Rs 118 crore. Its revenue from operations jumped 59 percent YoY to Rs 2,143.6 crore. At the operating level, the company's EBITDA zoomed 70 percent to Rs 358.2 crore during the quarter under review.
Following the Q1FY25 results, Nuvama raised the target price on PCBL stock to Rs 486 while retaining its 'buy' rating.
"As PCBL moves more towards a specialty product basket from its initial carbon black business, we are raising target valuation on EV/EBITDA to 13x from initial 9x, which is still at a discount of 40 percent to our specialty coverage companies," the brokerage said.
JM Financial also retained its 'buy' rating and raised target price to Rs 445 from Rs 335 earlier. Going forward, the broking firm believes that carbon black volume growth will continue to be robust on account of strong industry tailwinds. Looking at the current run-rate, PCBL has advanced its carbon black capacity expansion plans to lift its carbon black capacity to 1mmtpa by FY27/28.
On the Aquapharm side, margin improvements will continue owing to better utilisation and cost-efficiency measures, according to analysts at JM Financial. Over there, the company plans to enhance capacities by around 30 percent in the next 6-8 months while doubling capacities over the next five years.
"Factoring Q1FY25 results and management commentary, we raise our FY25/26/27 EBITDA/EPS estimates by ~5-6 percent," they said.
At 2:05 pm, PCBL shares were trading over 8.6 percent higher at Rs 489.05 on the National Stock Exchange (NSE). So far this year, the stock has rallied 90 percent, massively outpacing benchmark Nifty's returns of around 14 percent during this period.
The counter has rallied 206 percent in last 12 months, nearly tripling investors' capital. In comparison, Nifty delivered returns of around 27 percent during this period.
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