Phillips Carbon Black - The worst is over .....Accumulate Now

The Company

There's a bit of black in everything you see. In the newspapers you read, in that polyester suit you wore for the meeting today, in the car you drive, in the PET bottle you pour water from, in the handset you use, in the pen you write with, in the electric wiring of your building and your networking cables... and even in the printed sheets that might be lying on your table as you read this.

There's a bit of black in everything you see. This black is the business of Phillips Carbon Black Ltd. PCBL is Contry's largest carbon black maufacturer.

Pioneers in carbon black in the country, Phillips Carbon Black Limited (PCBL) is the eighth largest carbon black manufacturer in the world. Part of the illustrious RP-Sanjiv Goenka Group of Companies, PCBL is known for its technical collaborations with foreign entities and state-of-the-art manufacturing facilities. Apart from manufacturing carbon black, the company also manufactures various grades of specialty black.

The company has been continuously reinventing itself in order to make the best in class products. Despite being in a commodity business, PCBL’s after sales service and strong technical support ensures a fiercely loyal base of customers from around the world.

A few of  PCBL’s prized customers are CEAT, MRF, Apollo, Birla Tyres, Balkrishna, Goodyear, Sumitomo Tires, Bridgestone, Kumho Tires, among others.

The company has redefined its business by establishing captive power plants at each factory from the off-gas or waste product from the carbon black manufacturing process. Thus, creating a sustainable green movement.

Going forward, the Company intends to backward integrate into manufacturing coal tar pitch, creosote oil and naphthalene.  This move would enable the Company to reduce its dependency on external sources for the raw material required to manufacture carbon black, positively affecting its valuations.

Performance

Due to economic slow down the company could not perform well in last couple  of years but now the conditions are in favour of the company. The crude price is reduced by 50%  in last year. Crude is the basic raw material of carbon black. Though the price  of crude has been reduced drastically, the price of carbon black has not been reduced significantally and that will reflect in the result of 2nd and 3rd quarter of FY16.

Even in  FY16 Q1 PCBL reported EBITDA of Rs. 48.18 crore, a 15% jump over Rs. 41.81 crore achieved in a previous quarter. Sales Volume is increased by 10% from 76000 tonnes to 84000 tonnes compare to previous quarter. The PBT is Rs. 5.35 crore against the loss of Rs. 4.43 crore. FY16 Q1 reflects an improved operationa efficiency and better market penetration.

The under current seems that the promotors are accumulating stock. It  is clear cut value buy at CMP (Rs. 132) with potential to give extra ordinary return in 1-2 years time span.

Disclaimer : Holding Shares of PCBL and no other vested interest.

LINK : PCBL press release