Buy Oriental Carbon; target of Rs 1125: ICICI Direct

ICICI Direct's report on Oriental Carbon

As per industry estimates, total insoluble sulphur (IS) market globally as of CY15 is at 264 KT dominated by three major players i.e. oligopolistic in nature. Eastman Chemicals (US) is the market leader with close to 70% market share followed by Japanese Player Shikoku with 15% market share. OCCL with total sales volume in the range of 20-22 KT is the third credible player with 10% market share.

Outlook

With early commissioning of brownfield capacity and robust product demand, we expect sales & PAT to grow at a CAGR of 14.0% & 16.6%, respectively, in FY17E-19E. We value OCCL at Rs 1125 i.e. 17.0x P/E (1.0x PEG) on FY18E & FY19E average EPS of Rs 66.2. We maintain BUY recommendation on OCCL.