Phillips Carbon Black –Buy-Sharekhan

Phillips Carbon Black Ltd (PCBL)’s Q4FY2010 net income of Rs36.3 crore (vs a loss of Rs57.1 crore in Q4FY2009) was marginally above our estimate mainly on account of a higher than expected margin and a lower effective tax rate.

The total income from operations grew by 78.9% year on year (yoy) to Rs362.5 crore mainly on account of a 74.3% year-on-year (y-o-y) increase in the revenues from the carbon black segment to Rs347.3 crore. The revenue growth in the carbon black business was driven by a robust 40% y-o-y increase in the sales volume to 67,914 million tonne (MT) and a 24% y-o-y increase in the net realisation to Rs51,143 per tonne. The revenues from the power segment stood at Rs20.2 crore in Q4FY2010 vs Rs5.1 crore in Q4FY2009.

The company’s operating profit stood at Rs55.5 crore as compared to an operating loss of Rs73 crore in Q4FY2009. This turn-around was achieved on the back of a strong revival in the carbon black segment and strong earnings from the power segment. The operating profit margin (OPM) stood at 15.3% in Q4FY2010 vs –36% in Q4FY2010. On a sequential basis the OPM improved by 38 basis points.

The net income stood at Rs36.3 crore as against a net loss of Rs57.1 crore in Q4FY2009 mainly on account of a strong operating performance. The depreciation expenses grew by 101% yoy to Rs9.6 crore due to the commissioning of its 90,000-metric-tonne-per-annum (MTPA) carbon black plant at Mundra with effect from October 17, 2009. Further, the effective tax rate was only 1.4% vs 32.6% in Q4FY2010 due to the minimum alternate tax (MAT) credit entitlement of Rs6 crore during the quarter.

In terms of outlook, the company expects higher export sales volume in Q1FY2011 supported by the commissioning of new capacities. However, the increase in the feedstock cost (in line with the rising crude oil prices) is likely to put pressure on the margins in the carbon black segment.

The company fast-tracked its 50,000MT carbon black expansion plan at the Mundra plant along with 8MW of captive power plant (CPP) capacity and targets to commission the carbon black capacity by Q2FY2011 and the CPP by Q2FY2012. The total capital outlay for the two expansion projects is estimated at Rs115 crore. The company has issued 5 million shares at a price of Rs200 per share (face value of Rs10 and share premium of Rs190 per share) through qualified institutional placement (QIP) amounting to Rs99.3 crore. This has expanded the company’s current equity base of 2.8 crore equity shares by 17.5% to 3.3 crore equity shares.

We have incorporated higher volumes from the likely commissioning of the new 50,000MT capacity at Mundra from Q2FY2011 and the equity dilution from the issue of five million new equity shares in our earnings estimate. Consequently, our revised EPS estimates now stand at Rs47.2 and Rs49.7 for FY2011 and FY2012 respectively.

We have revised our price target to Rs250 and maintained our Buy recommendation on the stock. At the current market price, the stock trades at attractive valuations of 4.5x FY2012 earnings estimate and 3.7x FY2012 enterprise value (EV)/earnings before interest, tax, depreciation and amortisation (EBITDA).

Popularity: 5% [?]

Tags: buy carbon black, buy carbon black email, buyers of carbon black in india, carbon black buy email, carbon black buyer, carbon black buyer e-mail, carbon black buyer email, carbon black buyer emails, carbon black buyer with email, carbon black buyer@mail, carbon black buyers, carbon black buyers email, carbon black buyers in india, carbon black email, carbon black importer, carbon black importer e-mail, carbon black importer email, carbon black importer emails, carbon black importer in 2011 -china -buyers, carbon black importers, carbon black importers email, carbon black impoter email, carbon black purchaser, Free Share Tips, how do i find carbon black buyer in indian, how do i find the carbon black buyer, Phillips Carbon Black, Sharekhan

Category: Broker tips