The shares of India’s largest carbon black maker rose to 10 percent to a 52-week high of Rs 244.90 per share on Friday a day after JM Financial recommended a buy target with an upside of 30 percent.
On Friday, PCBL Ltd shares were trading at Rs 238.20, up Rs 7.09 or 15.90 percent from the previous close on the National Stock Exchange, While based on the current price it represents an upside of 22 percent.
The company’s share has delivered returns of 80 percent in six months and 76 percent in a year.
The company’s revenue has declined by 8.6 percent year on year, from Rs 1,627 crore in Q1FY23 to Rs 1,486 crore in Q1FY24. During the same period, the company’s net profit marginally increased by 5.17 percent, from Rs 116 crore to Rs 122 crore.
As of the September quarter, Ace investor Ashish Kacholia holds 70,84,990 shares in the company, which is equivalent to a 1.88 percent stake.
Based on an optimistic outlook on PCBL Ltd, JM Financial has given a buy target price of Rs 290, representing a 30% increase from Thursday’s close price. CNBC TV18 reported.
The JM Financial outlook is underpinned by the anticipation that European sanctions on Russian imports, effective from July next year, will present a lucrative export opportunity for Asian players.
JM Financial emphasizes PCBL’s strategic position within the RP-Sanjiv Goenka Group, placing it as a prominent participant in the lithium-ion battery carbon black market.
The rationale behind providing such a positive recommendation is
● Brokerage believe PCBL has structural tailwinds in place including elevated feedstock price for Chinese players due to higher use of coal tar towards synthetic graphite for EV batteries, lower availability of coal tar due to the shift towards electric arc furnace, and limited capacity additions in developed nations due to higher compliance costs.
● The brokerage expects PCBL’s EBITDA/Kg to improve to Rs 18/kg by FY27E from 11-16/kg over FY20-FY23 as its capacity mix increases towards specialty blacks at 15-16% of overall capacity in FY25/26E.
● The company’s EBITDA is expected to grow to Rs 1,090 crore and profit is expected to reach Rs 620 crore, the brokerage noted.
● PCBL is increasing its focus on research and development (R&D), notably in the specialty and performance blacks segment, which are critical components in electric vehicle (EV) batteries.
● Carbon black demand for lithium-ion batteries is expected to rise from 20,000 tonnes per annum (KTPA) to an astonishing 84 KTPA by 2030, according to the brokerage.
● Furthermore, the brokerage suggests that PCBL might explore opportunities in the carbon nanotube (CNT) space, applicable to Silicon and Graphite anodes, further diversifying its portfolio.
Phillips Carbon Black Ltd(PCBL) is the largest manufacturer and supplier of carbon black, that caters to the needs of elastomer, plastic, paints, and ink manufacturing industries. The company also manufactures Special Black for non-rubber applications.
Written by Omkar Chitnis
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