Buy Oriental Carbon and Chemicals; target of Rs 1480: Centrum Research

Centrum Research's research report on Oriental Carbon and Chemicals

We maintain our positive stance on Oriental Carbon & Chemicals (OCCL) and retain Buy with a revised TP of Rs1480. Q4 performance was satisfactory and second line at Mundra has started trial-runs ahead of schedule. We continue to remain positive on company’s prospects led by solid demand outlook for IS in domestic market led by fast paced growth of domestic tyre manufacturers and opportunity for gaining market share in new geographies of US & China. Consolidated margins are expected to improve materially over FY18-20E led by i) higher share of IS business with increasing volumes coupled with benefits of operating leverage and ii) positive contribution from downsized subsidiary Duncan Engineering.

Outlook
We value OCCL on our conservative AOCF/EV yield based on five year average cash flows to arrive at our revised TP of Rs1480. Maintain Buy. Key downside risks are lower volumes and rupee appreciation. For all recommendations report, click here

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