Phillips Carbon Black

ICICI Direct:
PCBL Ltd (PHICAR) BUY

Current 120, target 170

Healthy volume growth on the anvil starting FY24E …

About the stock: PCBL Ltd (erstwhile Phillips Carbon Black ) is the leading

manufacturer of carbon black, which is used as a reinforcing material in tyres.

 PCBL also derives ~9% of sales volume from speciality carbon black, which fetches high margins and finds application in paints, plastics among others  It has a healthy margin profile, capital efficient business model (RoCE>15%) with limited leverage on b/s (~0.3x debt: equity as of FY22)

What should investors do? PCBL’s stock price is nearly flat over the past five years, but has still generated wealth since our initiation in July 2016 (~| 17.5 levels).

 We retain BUY rating on the stock amid organic growth on anvil amid new capacity coming on stream, rising share of specialty grade carbon black and it gaining more traction in export markets amid lower supply from China Target Price & Valuation: Incorporating FY25E and rolling over valuations, we now value PCBL at unchanged target price of | 170 i.e. 12x P/E on FY24-25E