PCBL soars 10% on healthy outlook; stock skyrockets 93% in one month

PCBL share price hit a new high of Rs 498.80 on the BSE on Friday, soaring 11 per cent on the BSE in the intraday trade on healthy volumes. The stock of the RP-Sanjeev Goenka Group company has zoomed 93 per cent in the past one month.

PCBL (erstwhile Phillips Carbon Black) is a leading manufacturer of carbon black, which is used as a reinforcing material in tyres. PCBL also derives around 11 per cent of sales volume from speciality carbon black, which fetches high margins and finds application in paints, plastics, etc.

The company, also, acquired a speciality chemical company -- Aquapharm Chemicals Pvt. Ltd (ACPL) -- recently which is engaged in water treatment and industrial cleaning chemicals space.

ACPL enjoys a strong market position in the business of manufacturing specialty water treatment solutions like phosphonates, chemicals (used in oil and gas sector), and polymers catering to reputed global customers across diverse end-markets. The acquisition shall lead to diversification of the existing product portfolio of PCBL into a high margin speciality chemicals business, with wider geographical reach.

PCBL said the growing automobile, electronics, packaging, and construction industry will drive the demand for specialty application in plastic, inks, paints, coatings, etc.

Electric vehicle (EV) market, meanwhile, is projected to grow at 40-45 per cent the compound annual growth (CAGR). The improving energy density, charging speed, and longevity making lithium-ion batteries attractive and government policies and incentives are likely to boost growth. Besides, growing industrialisation and urbanisation will drive the demand for treated water at 4-5 per cent CAGR, PCBL said in its investor presentation.

Going forward, analysts at JM Financial Institutional Securities believe carbon black volume growth will continue to be robust on account of strong industry tailwinds. Looking at the current run-rate, the company has advanced its carbon black capacity expansion plans to lift its carbon black capacity to 1mmtpa by FY27/28.

On the Aqua-pharm side, margin improvements will continue owing to better utilisation and cost-efficiency measures. Over there, the company plans to enhance capacities by ~30 per cent in the next 6-8 months while doubling capacities over the next 5 years, the brokerage firm said.

Going forward, analysts at JM Financial expect carbon black volume CAGR of 14 per cent over FY24-27E. Besides, higher utilisation of Aquapharm's capacities should result in positive operating leverage. This is likely to result in a roughly 22 per cent/20 per cent Ebitda/EPS CAGR over FY24-27E. The stock, however, is trading above the brokerage firm's target price of Rs 445 per share.

On its part, PCBL believes that its operating cash flow, over the next 5 years, should take care of the debt and capex requirements of Rs 3,500 crore.