Buy Phillips Carbon Black; target of Rs 135: ICICI Direct

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26 Aug, 2025 12:21

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ICICI Direct's research report on Phillips Carbon Black

Phillips Carbon (PCBL) reported a steady performance in Q4FY20. Net sales in Q4FY20 were at Rs 700 crore, down 24% YoY. Carbon black sales were at Rs 680 crore, down 24% YoY, while power segment sales were at Rs 39 crore, down 7% YoY. Carbon black sales volume in Q4FY20 was at ~99,000 tonne (down 3% YoY) with consequent realisations at Rs 69/kg vs. Rs 88/kg in Q4FY19. EBITDA in Q4FY20 was at Rs 99 crore with EBITDA margins at 14.2% and consequent EBITDA/tonne at Rs 10,000/tonne. PAT in Q4FY20 was at Rs 72 crore, almost flat YoY, supported by a negative tax rate. On the B/S side, gross debt was down from Rs 796 crore in FY19 to Rs 719 crore in FY20. On the cash flow front, CFO for FY20 was at ~Rs 550 crore led by improved net working capital cycle with FCF for the year at ~Rs 200 crore (>10% FCF yield).

Outlook

We like PCBL for its capital efficient business model (RoCE>15%), controlled leverage on B/S (debt: equity at 0.4x in FY20) as well as robust cash flow generation. We maintain our BUY rating on the stock with a target price of Rs 135 valuing it at 5.5x EV/EBITDA (8.5x implied P/E) on FY22 numbers.

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