Phillips Carbon Black Ltd (PCBL) shares have surged over 90% in 2023 and offer further upside potential of 28.1% based on JM Financial’s buy rating and price target of Rs 320 per share. Here’s the bull case and outlook for this carbon black manufacturer’s stock.
PCBL Gains Over 90% YTD, Rally May Continue
PCBL share closed at Rs 249.80 on December 22, 2023 on the BSE, representing a 1.05% intraday gain. The stock has generated remarkable returns across various time frames:
- Year-to-date: +92.67%
- 1 year: +95.46%
- 2 years: +122%
- 3 years: +226.62%
- 10 years: +4631%
With a market capitalization of Rs 9,429 crore, PCBL is the largest carbon black manufacturer in India. JM Financial sees further upside given industry tailwinds and the company’s dominant position.
JM Financial Sets Rs 320 Target Price, 28% Upside
JM Financial has initiated coverage on PCBL shares with a “Buy” rating and set a target price of Rs 320. This represents potential upside of 28.1% from the last trading price.
The brokerage is positive on PCBL due to:
- Leader in organized carbon black industry
- Robust volume growth outlook
- Margin expansion from operating leverage
- High return ratios and cash generation
JM Financial expects PCBL’s earnings per share to grow at a 22% CAGR over FY23-25 driven by 17% revenue CAGR and 230 bps EBITDA margin expansion.
Top Shareholders Remain Bullish
Some large shareholders have increased their holdings in PCBL recently, indicating their positive outlook. Key investors in the company include:
- ICICI Group: 2.51%
- Ashish Kacholia: 1.88%
- HDFC Group: 1.67%
The buying by marquee investors affirms confidence in PCBL’s growth prospects in the coming years.
Dominant Player in Attractive Indian Carbon Black Industry
PCBL is the largest manufacturer of carbon black in India with a market share of over 50%. Some key highlights about the company:
Leading Supplier of Carbon Black in India
With a production capacity of ~460,000 MT per annum, PCBL can manufacture any grade of carbon black as per customer requirements. Its scale and cost efficiencies make it the supplier of choice for major industries.
Serves Diverse End-User Industries
The company caters to the rubber, plastic, paints & coatings industries. Tyres account for 75% of demand, while the rest comes from specialized non-tyre rubber and plastic products. This diversified customer profile allows stable growth.
Strategic Capacity Additions
To capitalize on industry growth tailwinds, PCBL has been consistently adding capacity in a phased manner while maintaining high asset turns. Its ability to scale up swiftly and cost-efficiently reinforces competitive strengths.
Innovation and Customization Capabilities
Over the years, PCBL has built up significant R&D capabilities, allowing it to innovate and introduce new customized product grades. This enables the company to move up the value chain while deepening customer partnerships.
Conclusion
In conclusion, Phillips Carbon Black remains well-positioned to leverage India’s large and fast-growing carbon black industry.
The company’s strategy of disciplined capacity expansion, customer diversification and increasing specialty product mix should support medium to long term growth.
Investors with a high risk appetite could consider buying the stock at current levels for a potential 28% upside over the next 12 months.