400% Returns: Midcap Chemical Stock PCBL Dips 11% On Weak Q3 Results, Net Profit Slumps 37% YoY

The shares of PCBL (formerly Phillips Carbon Black), a major player in the carbon black manufacturing industry, fell sharply by 11.35% in early trading on January 13, reaching a five-month low of Rs 346.60 per share. The drop came after the company reported lower-than-expected earnings for Q3FY25, which were released post-market hours on Friday.

For the third quarter of FY25, PCBL reported a significant year-on-year (YoY) decline in net profit. The consolidated net profit for the quarter fell by 37%, dropping to Rs 93 crore, compared to Rs 148 crore in the same period last year. This sharp fall in profitability was primarily driven by a significant rise in operating expenses. The company's total expenses surged by 23% YoY, reaching Rs 1,693 crore from Rs 1,378 crore in Q3FY24. Among the notable expense increases, finance costs skyrocketed by 254% YoY to Rs 117 crore, while employee benefit expenses surged to Rs 105 crore from Rs 61 crore in Q3FY24.

Despite the challenging profit margins, PCBL saw growth on the revenue side. The company's revenue from operations increased by 21.3% YoY, totalling Rs 2,010 crore. However, this was accompanied by a 7% sequential decline compared to Q2FY25. Operating performance presented a mixed picture as well. Although the company's EBITDA improved to Rs 317 crore, up from Rs 279 crore YoY, it still fell short of the Rs 364 crore achieved in the previous quarter. This led to a contraction in the operating profit margin, which decreased to 16% from 17% in Q3FY24.

In terms of sales volumes, PCBL saw a modest 5% growth YoY, with sales volumes reaching 143,500 metric tons (MT) in Q3FY25, compared to 136,108 MT in Q3FY24. Despite the increase in volume, the consolidated EBITDA per metric ton of carbon black stood at Rs 19,868 in Q3FY25.

On a more positive note, PCBL shared updates on its expansion in specialty chemicals. The second phase of its 20,000 MTPA specialty chemical capacity at the Mundra Plant in Gujarat has been successfully commissioned, raising the company's total installed capacity to 790,000 MTPA. The company also received the International Sustainability and Carbon (ISCC) PLUS certification, reinforcing its commitment to sustainability, circular economy practices, and reducing greenhouse gas emissions.

Additionally, PCBL made strides in its expansion plans by securing 116 acres of land in Andhra Pradesh for a new carbon black plant. The strategic location, close to major ports and customer hubs, is expected to improve the company's logistics efficiency and facilitate the smooth movement of raw materials and finished products. The company has set targets, aiming to reach a total carbon black capacity of 1 million MTPA in the next two to three years.

However, despite these growth initiatives, the stock has been under pressure. PCBL's stock has seen a dramatic 38% drop from its all-time high of Rs 584.40 per share. In October, the stock experienced a steep 29% decline, and it has fallen by an additional 20% so far in January.

The shares of PCBL were seen trading with deep cuts of more than 9% at Rs 355.50 per share as of 2:10 pm on the National Stock Exchange (NSE). Nevertheless, the stock's long-term performance has been impressive. Over the last three years, PCBL has delivered a remarkable 191% return, while its five-year return stands at an even more impressive 453%. Despite the recent correction, the stock continues to be viewed as a multibagger for long-term investors.