ICICI Securities research report on PCBL
PCBL’s volume growth has accelerated with new capacity addition and higher contribution from specialty grade. Despite spot volumes sales from its Chennai facility, PCBL was able to maintain gross profit/kg. Going forward, it expects spreads to improve by INR 1/kg. Opportunity to drive higher volumes exists in exports market with supplies tightening in western countries and restriction on Russian carbon black. Entry into conductive carbon black is an added growth driver that should aid margin expansion as well.
Outlook
We tweak our FY24E/FY25E EPS slightly, but raise our target price to INR 235 (from INR 200) as we increase the FY25E PE multiple to 16x (from 13x) given a better outlook and improving execution. Risks: 1) Rise in competitive intensity from China; and 2) lower-than-expected gross profit per kg.
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