ICICI Direct's research report on Phillips Carbon Black
The Commerce Ministry has concluded its study thereby proposing to extend anti-dumping duty (ADD) on imports of carbon black (used for rubber applications) into India; largely from China and Russia. The ministry opined that imports without ADD will cause substantial injury to the domestic carbon black industry. The study proposes to impose a duty of US$494 per tonne on carbon black origination from China and US$36.2 per tonne on carbon black originating from Russia and other countries. The said proposal is likely to be approved by the Finance Ministry with final notification expected by December end. Extension of ADD helps protect sales volumes of domestic carbon black players with consequent better operational efficiencies and is not a medium to increase prices to import parity levels. It is positive for all carbon black players, especially Phillips Carbon Black (PCBL) given its market leadership domestically (market share of ~35%+).
PCBL has a healthy B/S (limited leverage), capital efficient business model (RoCE>15%) and generates robust cash flow from operations (CFO yield >15%). We maintain our BUY rating on the stock with a revised target price of Rs 210 (Rs 180 earlier) valuing it at 10x P/E on FY23E EPS of Rs 21.0. Conservatively, as of now, we have not built in any volumes from greenfield capex under implementation as the company awaits regulatory approvals.
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