Buy Phillips Carbon Black; target of Rs 160: ICICI Direct

ICICI Direct's research report on Phillips Carbon Black

Phillips Carbon Black (PCBL) reported a muted Q4FY19 performance. Carbon black (CB) sales volume for the quarter was at 102 KT with consequent net sales at Rs 921 crore. EBITDA in Q4FY19 was at Rs 112 crore with corresponding EBITDA margins at 12%, down 700 bps QoQ. EBITDA margins were marred by one-offs amounting to ~Rs 50 crore. Adjusting for this, EBITDA margins were at ~17.2%, down ~200 bps QoQ. Consequent PAT in Q4FY19 was at Rs 74 crore vs. Rs 109 crore in Q3FY19.

Outlook

We value PCBL at Rs 160 i.e. 5x EV/EBITDA on FY21E numbers and assign a BUY rating on the stock. We also derive comfort from average CFO yield over FY19-21E at 16% & with limited capex spend, FCF yield placed at 5.5%.