Oriental Carbon stock up over 50% in July; what's leading the bull charge?

A combined 1.58 million shares changed hands in trade on Monday, July 15, and there were pending buy orders for 180,000 shares on the NSE and BSE, data showed

Shares of Oriental Carbon & Chemicals hit the upper circuit of 20 per cent at Rs 300 on the BSE on Monday, July 15 at 02:26 pm; amid heavy volumes with only buyers seen on the counter.

A combined 1.58 million shares changed hands in trade on Monday, and there were pending buy orders for 180,000 shares on the NSE and BSE.

Thus far in the month of July, Oriental Carbon & Chemicals stock price has zoomed 54 per cent from Rs 195 touched on July 1, the day it turned ex-chemical business.

Oriental Carbon & Chemicals demerger scheme

The board of directors of Oriental Carbon & Chemicals at their meeting held on May 24, 2022, approved the Scheme of Arrangement between the Company and OCCL  (wholly owned subsidiary of the company), wherein the chemical business will be demerged from the company to OCCL. Shareholders will receive five equity shares of Rs 2 each in OCCL for every one equity share of Rs 10 each in Oriental Carbon.

In April 2024, Oriental Carbon received approval from the Honorable NCLT for the demerger scheme. This milestone unlocks significant value within both the demerged and resulting Companies, aligning with their unique risk-return profiles and cash flows. Additionally, this move enables a sharper focus on individual growth strategies and expansion opportunities, ensuring optimized performance and value creation for stakeholders, the company said.

Meanwhile, the management in investor presentation in May 2024 said the company is witnessing a challenging global environment characterized by elevated inflation, lower demand and realizations of chemicals globally.

Oriental Carbon & Chemicals fundamentals

The demand in Europe which is the second largest market for your company has been sluggish due to Macro Economic and Geopolitical Environment including ongoing conflicts. Excess of production capacities over demand, is resulting in pressure on prices and margins globally. This is expected to continue until a balance is reached in capacity and demand.

In view of imports at very low prices, the Company has applied to DGTR for recommendation of Anti-Dumping Duty on import of Insoluble Sulphur from China and Japan, the management said.

Oriental Carbon & Chemicals FY24 annual report

Oriental Carbon in its FY24 annual report said, the Company worked at a capacity utilisation of about 70 per cent during the financial year.

There is adequate capacity within the system to respond to a sectorial upturn, it said. Besides, the Company does not intend to engage in any sizable capital expenditure across the near future.

All surplus generated is likely to be allocated towards nominal maintenance capital expenditure, term loan repayment and net worth accretion, strengthening the Company’s fundamentals.

"The Indian automotive market continues to provide optimism, based on increased disposable incomes, superior lifestyle aspiration, need for personal mobility, widening choice by automobile brands, and the emergence of electric vehicles. The management believes that the under-penetration of vehicles in India is likely to correct faster, strengthening prospects for companies like ours that account for a disproportionate market share and did not lose a customer during the last financial year," it added.

The Company will seek to market to a wider range of companies in India and the world over, the annual report said, carving out a sustainable share of their insoluble sulphur purchases. This sales visibility and improved sectorial realisations, Oriental Carbon & Chemicals believes, would be an incentive for the Company to achieve a higher capacity utilisation and report higher capital efficiency.