ICICI Direct's research report on Phillips Carbon Black
Phillips Carbon Black (PCBL) reported a steady performance in a Covid impacted Q1FY21. Net sales for the quarter were at Rs 360 crore, down 61% YoY. Carbon black sales volume for the quarter came in at ~51,300 tonne, down 52% YoY with blended realisation at Rs 68/kg vs. Rs 83/kg in base quarter. PCBL reported positive EBITDA and PAT prints despite a steep decline in sales volume and value. EBITDA in Q1FY21 was at Rs 39 crore with EBITDA margins at 10.7% (EBITDA/tonne at ~Rs 7,500/tonne). PAT in Q1FY21 came in at Rs 2.3 crore. The company guided for near normalcy in operations courtesy aftermarket sales in its key user industry tyres.
Outlook
PCBL has successfully transformed itself into a quality franchise with stable business model, sound capital efficiency (RoE, RoCE>15%) and increasing focus on margin accretive value added products (speciality grade carbon black). We retain our positive stance and maintain BUY rating on the stock, valuing it at Rs 175/share i.e. 10x P/E on FY22E EPS of Rs 17.5/share.
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