Buy PCBL Ltd. For Rs. 160 Target Price For 12 Months: ICICI Direct

Indian markets in line with their Asian peers have taken a knock in trade on April 22, 2022. The markets have taken a beating after Federal Reserve's aggressive tightening stance. Fed Chair Jerome Powell overnight said a half point interest rate increase shall be on the table when it meets next in May and it shall be appropriate to "be moving a little more quickly."

Meanwhile, brokerage firm ICICI Direct post the quarterly result announced has put its bet on PCBL Ltd. Let's know the price target and the rationale for the brokerage's Buy on the same

Philips Carbon Black: Buy for a price target of Rs. 160 or an upside of 34.45%.

PCBL Ltd. Earlier referred to as Philips Carbon Black is the top manufacturer of Carbon Black. This substance finds application as a reinforcement material in tyres. The company also gains sales volume from speciality carbon black that is used in paints, plastics etc. Further the company has a healthy margin with RoCE of over 15% and limited leverage of 0.3x.

Q4FY22 Results:

The company's Q4 earnings have remained muted with net sales for the quarter under review reported at Rs. 1219 crore, up 5% QoQ, primarily driven by 10% QoQ growth in carbon black. Speciality grade volumes - 9,350 tonne
EBITDA in Q4FY22 was at Rs. 137 crore. PAT for the quarter came in at Rs. 90 crore, down 19% QoQ. For FY22, total carbon black sales volume was at 454 KT, up 17% YoY with
EBITDA at Rs. 656 crore (up 26% YoY) and PAT at Rs. 427 crore (up 37% YoY).

Target Price and Valuation:

"Revising our estimates and rolling over valuations to
FY24E, we value PCBL at unchanged target price of | 160 i.e. 12x P/E on FY24E EPS

Rationale or key triggers that shall boost company's stock performance going ahead:

The company is seen to register sound double digit growth and the brokerage expects sales, PAT to grow at 26% 17%, CAGR, respectively, in FY21-24E, building in 11.4% volume CAGR.Other key points include "With greenfield expansion (~150 KT) under execution and successfulstrides made in the speciality carbon black domain, long term growthprospects are robust amid limited competition in overseas marketsTrades at inexpensive valuation of

Disclaimer:

The stock is taken from the brokerage report of ICICI Direct and the story should not be construed as an investment advice.