PCBL Ltd (erstwhile Phillips Carbon Black) is the leading manufacturer of carbon black, which is used as a reinforcing material in tyres. PCBL is India’s largest and world’s 7th largest carbon black manufacturer with installed capacity of ~7.7 lakh tonnes as on date. Sensing robust demand prospects especially in Export market, it is looking at adding 90 KT capacity via brownfield expansion at its new Tamil Nadu plant (30KT due for commissioning in Q3FY25) and scouting for a new greenfield plant. It is targeting double digit volume CAGR over next 5 years and is looking at substantial export play with near term capacity pegged at ~10 lakh tonne. We have modelled carbon black sales volume at PCBL to grow at a CAGR of 11% CAGR over FY24-27E to 7.3 lakh tonne in FY27E. Exports share in its total carbon black sales volume mix is on the rise from 27% in FY21 to 38% in FY24 and is further slated to increase to 45% by FY27E.
With organic levers of growth amidst changing business profile in favour of more speciality chemical play, healthy margin & RoE profile (~15%+), robust cash flow generation, we retain BUY rating on PCBL. We value PCBL at ₹600 i.e. 24x P/E on FY27E. We believe the current correction in stock price offers good entry point for long term wealth generation.
