Phillips Carbon Black: To increase capacity to ~5,00,000 MTPA by FY19

SPA Securities | Nov. 8, 2016, midnight

Phillips Carbon Black Ltd. (PCBL), a part of RP-Sanjiv Goenka Group, is India's largest and globally seventh largest carbon black (CB) producer. PCBL has four strategically located state-of-the-art plants at Durgapur, Palej, Cochin and Mundra with capacity totaling to 4,10,000 MTPA along with green power capacity of 76 MW. PCBL also has a dedicated capacity of Specialty Blacks of 40,000 MTPA at Palej. PCBL provides a complete portfolio of products to meet the specific end requirements across Rubber, Plastics, Coatings, Inks and other niche industries globally. PCBL is also the first carbon black company in the world to receive carbon credits.

Given below are the key takeaways from the meet:-

- Steady growth in global CB demand and shift from China to drive volumes

- Capacity expansion to support off take

- Increasing contribution of specialty CB to expand margins further

Outlook & Valuation

CB volume of PCBL has grown at a CAGR of 3.9% through FY13 to FY16. With a turnaround in operations, PAT stood at INR 228.6mn in FY16 (-206.5mn in FY13). With a market share of ~33%, PCBL is the largest player in domestic CB industry. Considering robust demand in domestic automobile industry and structural changes in global CB market, we believe that PCBL is well positioned to capitalize its position. At CMP of INR 322, PCBL is trading at 18.5x its FY17E annualized EPS of INR 18.5.


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