Midcap Stock Reports Rs. 1409 Cr Revenue, Up 40% YoY, Gain High Return In 2 Quarters: HDFC Securities

Top brokerage firm HDFC Securities suggests investors to buy the stock of PCBL Ltd. The company reported robust revenues of Rs. 1409 crore, increased by 40.4% YoY, and increased by 15.6% QoQ, mainly on account of better realization with an increased share of specialty black volumes.

Stock Value

"PCBL continues to focus on improving its operating efficiencies and improving its product mix. We expect revenue/EBITDA/PAT to grow at CAGR of 16%/20.5%/18% over FY22-24E. We think the base case fair value of the stock is Rs. 153 (9.75x FY24E EPS) and the bull case fair value is Rs. 165 (10.5x FY24E EPS) over the next three quarters. Investors can buy the stock in the band of Rs. 135-139 (8.8x FY24E EPS) and add more on dips to Rs. 120-123 band (7.75x FY24E EPS)," the brokerage firm mentioned.

Capacity expansion

Capacity expansion of 147 KT at Greenfield project (at Tamil Nadu) through its wholly owned subsidiary PCBL (TN) ltd is on track and is expected to be completed by Dec 2022. It expects to start commercial production post stabilization time of 3-4 months. Work on brownfield project at Mudra for specialty carbon black is going on as per schedule and one line (phase 1 - 20,000 tonnes) is expected to be commissioned by March 2023. The 7 MW power plant in Kochi is under commissioning stage, post which power generation capacity will enhance from current 91 MW to 98 MW. The management continues to remain focused on expanding its product portfolio of high performance high-margin grades for both rubber and specialty black applications. The management maintained its guidance of incremental 10,000 tonne of specialty carbon black volume per annum over the next couple of years.

Company Portfolio:

PCBL Ltd (erstwhile Phillips Carbon Black Limited) is the largest manufacturer of carbon black in India and 7th largest in the world, having an aggregate installed capacity of 603,000 MT per annum (with a dedicated capacity for specialty black of 72,000 MT) and total green power generation capacity of 91 MW. PCBL offers above 75 grades of carbon black including above 40 grades in specialty from its own R&D developments. The company has progressively climbed the value chain, expanding its portfolio of high-performance value-added grades for rubber and specialty black applications.

Leveraging an efficient supply chain and distribution network, it has carved out its presence in above 45 countries. In the Carbon-Black market, PCBL enjoys a large 50% market share in India, 11% globally and 17% world ex-China.

Disclaimer

The above stock was picked from the brokerage report of HDFC Securities. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.