Buy Oriental Carbon & Chemicals; target of Rs 1560: Centrum

Centrum's research report on Oriental Carbon & Chemicals

We maintain our positive stance on Oriental Carbon & Chemicals (OCCL) and retain Buy with a revised TP of Rs1560. Q1 performance was satisfactory and second line at Mundra has been commissioned in July. 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 globally led by higher penetration in new geographies of US & China.

Outlook

OCCL’s subsidiary’s turnaround from FY18E (~10% revenue share) would further aid its consolidated margin. We value OCCL on our conservative AOCF/EV yield based on five year average cash flows to arrive at our revised TP of Rs1560. Maintain Buy. Key downside risks are lower volumes and rupee appreciation.