Buy Oriental Carbon; target of Rs 1400: ICICI Direct

ICICI Direct’s research report on Oriental Carbon
Oriental Carbon & Chemicals (OCCL) is a speciality chemical company manufacturing insoluble sulphur, a key raw material used in vulcanisation of rubber while manufacturing tyres (automobile) The company has a prom inent market share in the domestic market (in excess of 50%) whereas its global market share was at ~10% OCCL has a capital efficient business model and has been clocking healthy 25%+ EBITDA margins on a consistent basis(FY10-17).

Outlook

we now expect sales & PAT to grow at a CAGR of 11.0%& 16.2%, respectively, in FY17-19E.With certainty of operations & commissioning of new facilities,we roll over our valuation to FY19E and value OCCL at | 1400i.e. 20.0x P/E on FY19E EPS of | 70.0.We retain BUY rating on the stock.

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