Company Background & Product Highlights
Phillips Carbon Black Limited (PCBL), incorporated in 1960, in collaboration with Phillips Petroleum Company, is a part of RP-Sanjiv Goenka Group. It is the largest manufacturer of carbon black (CB) in India (46% market share by capacity) and seventh largest in the world, having an installed capacity of 4,72,000 MT and co-generation power capacity of 76 MW spread over four locations in Durgapur (W.B.), Palej & Mundra (Gujarat), and Kochi (Kerala). CB is used as a reinforcement material providing tensile strength to tyres and other industrial rubber goods and forms 23% by volume of tyre weight and 10% by value of tyre costs.
Strong Quarter – Carbon Black vertical steering profitability
PCBL is well positioned to capitalize on the positive structural changes witnessed by the industry coupled with robust auto sector demand, continuation of anti-dumping duty on Chinese imports, steep correction in international crude prices and improvement in operational efficiencies. Given the above factors, we have valued the stock on the basis of P/E of 11x of FY19E earnings. We recommend a BUY on the stock with a target price of Rs 606/- (39% upside) in 18 months.
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