PCBL shares rise on strong Q3 results; Nuvama sees 14% potential upside

Shares of carbon black maker PCBL Ltd, formerly known as Philips Carbon Black, rose as much as 2.90 per cent to trade at Rs 283.70 in Tuesday's deals. At today's high price, the stock was just 1.43 per cent away from its one-year high of Rs 287.80, a level seen during the previous trading session. That said, the multibagger counter has gained 162.56 per cent from its 52-week low price of Rs 108.05, hit on March 29 last year.

Nuvama Institutional Equities has given a 'Buy' call on the stock with a 12-month target price of Rs 323, suggesting a potential upside of 13.85 per cent.

"PCBL posted strong Q3 FY24 results with improvement across segments. We expect the latest acquisitions to drive growth and help diversify product offerings. Q3 revenue increased by 13 per cent YoY to Rs 1,650 crore aided by a higher contribution from both segments: carbon black and power. Gross margin shot up by 750bp YoY to 29.7 per cent, primarily led by a product mix change and drop in realisation YoY. Realisation peaked last year and had started falling from Q1 FY24," the domestic brokerage stated.

"Average realisation declined to Rs 121,724/mt, down 16 per cent YoY; however realisation bottomed out in Q2 FY24 and was up 7 per cent QoQ. EBITDA surged 66 per cent YoY to Rs 270 crore while EBITDA margin reached its highest in nine quarters to 16.8 per cent. Resulting PAT jumped 48 per cent YoY to Rs 150 crore, above estimate," Nuvama added.

It also mentioned that PCBL has consistently turned in product mix improvement with the share of performance chemicals increasing from 21 per cent in Q3 FY23 to 27 per cent in Q3 FY24 and that of speciality from 9 per cent to 11 per cent over the same period. A improved product mix lifted margin/mt from Rs 16,500 in Q3 FY23 to Rs 20,500 in Q3 FY24, the brokerage further said.

During Q3 FY24, Nuvama highlighted that PCBL made two new acquisitions - taking over Aquafarm Chemicals and forming a joint venture with Kinaltek. "These acquisitions are set to be financed through a mix of internal accruals and an NCD worth Rs 700 crore at an interest rate of 8.75 per cent with the repayment over next five years. Management is confident of the deals being earnings-accretive and repaying the debt over the next 30 months from the internal cash flows," it said.

The company has also declared an interim dividend of Rs 5.50 per share. As of December 2023, promoters held 51.41 per cent stake in the company.

(Disclaimer: Business Today provides stock market news for informational purposes only and that should not be construed as investment advice. Readers are encouraged to consult a qualified financial advisor before making any investment decisions.)

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