Sanjiv Goenka's bullish profit forecast for PCBL fuels a 10 percent rally

The projections of over five-fold growth in the bottomline of PCBL in five years is expected to take the profit to the range of Rs 2,400-2,500 crore.

Chairman Sanjiv Goenka's bullish projections for the RPSG Group's carbon black play - PCBL Limited - have inspired a 10 percent surge in the share price on July 30, extending Monday's healthy gains.

The projections of over five-fold growth in the bottomline over five years is expected to take PCBL's profit to the range of Rs 2,400-2,500 crore. The business margins are projected to go from current 14 percent to 17-18 percent as the share of specialty business rises, Sanjiv Goenka had told CNBC-TV18's Shereen Bhan in an exclusive conversation.

PCBL's current market capitalisation is around Rs 12,500 crore.

"We will grow in the rubber black business, and importantly in speciality blacks where margins are higher", Sanjiv Goenka had said, adding that he sees the bottomline multiplying in the next five years. "We see a 5x growth in profit over five years from this level", he said.

A Specialty Chemicals Bet

This projected migration from a commodity play into a specialty chemicals company has evoked strong market interest in the shares of the company. "The rising demand for specialty chemicals has prompted major manufacturers to bolster their production capacities and transition their production lines from standard carbon black to specialty variants", PCBL told shareholders in its 2023 annual report.

Demand from Tyres Industry

"With the transition towards electric vehicles, it is expected that a fresh demand in the tyre segment will boost OEM tyre demand over the long-term", PCBL said in its 2023 annual report. "The Indian carbon black market is poised for decent growth through 2028, primarily driven by growing automobile & tyre demand & specialty applications", PCBL's annual report added.

PCBL is an industry leader in carbon black with the maximum production capacity. "The Indian carbon black industry is highly concentrated, with a small number of players accounting for the majority of the production", the company said, underscoring its moat and competitive advantage.

Recent Acquisition in Chemicals Business

The company had acquired Aquafarm Chemicals (ACPL) in November 2023, marking a foray into global speciality segments for water treatment chemicals and oil & gas chemicals. ACPL is a Pune-based globally top three leading specialty chemicals company, manufacturing and water treatment chemicals. The company has manufacturing facilities in India, the US, and Saudi Arabia. Overseas plants are being operated through subsidiaries.

"The acquisition of Aquapharm Chemicals for a cash consideration of Rs 3800 crores is, we believe, a significant milestone for it in its journey to become a full-fledged specialty chemical player," JM Financial had said soon after the announcement last year.

Acquisition in EV Space

PCBL had in November 2023 also entered into a joint venture with Australian company Kinaltek to expand into the growing battery application market. The acquisition is expected to enable foray into cathode chemistry for electric vehicle (EV) batteries, Sanjiv Goenka said.