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1 GWM
Edelweiss Investment Research
Long Term Recommendation: Phillips Carbon Black Ltd
Brownfield expansion to drive growth
Phillips Carbon Black Limited (PCBL) is the largest producer of carbon black in India (37%
market share) and the seventh largest worldwide. The company is expected to be a major
beneficiary of tyre investments in India which is likely to keep utilisation levels high for rubber
carbon black. Margin per ton is likely to also increase driven by mix shift towards specialty
black. We initiate coverage with a BUY rating, anchored by: 1) Global and domestic supply
tightness in the carbon black market; 2) Higher coal tar prices that make crude-based CBFS
more competitive than CBO; 3) Shift in mix towards specialty black, which is likely to improve
margins; and 4) Protection from Chinese imports due to antidumping duty on rubber carbon
black.
Global supply tightness, high tyre investments to keep utilisation levels high
World carbon black utilisation levels are likely to increase from the current levels of 82% to 86%
by FY21 as demand is likely to outstrip supply additions over the next four years. Moreover,
significant tyre investments in the Asia-Pacific region (APAC; 46% of worldwide tyre
investments of USD22 bn) are likely to keep utilisation levels high for rubber carbon black
producers in the region; India alone is expected to need an incremental 180 kilo tonnes per
annum (KTPA) of rubber carbon black over 2016–21. We expect PCBL’s rubber carbon black
utilisation levels to remain above 90% over the next three years, even after brownfield
capacity additions of 48,000 metric tonnes per annum (MTPA) in H2FY19.
Higher coal tar prices make other crude-based CBFS more competitive
Carbon black production in China (41% of global production) largely relies on coal tar as
feedstock. Chinese coal tar prices fell until 2016, driving down floor prices for carbon black
and pulling down realisations and profitability of carbon black producers worldwide that used
local/US Decant oil as feedstock. After five years of volatility, Chinese coal tar prices rallied in
2017, almost tripling since November 2016 making other crude-based carbon black feed
stock (CBFS) competitive vis-à-vis carbon black oil (CBO). With pollution concerns in China
likely to remain elevated, we expect coal tar prices to remain high in the future, resulting in
absolute rupee margins for rubber carbon black to remain near the levels seen in H1FY18.
Mix change towards specialty carbon black to bring better EBITDA/tonne
Specialty black, used as black pigment and as an additive to enhance material
performance, is a niche, high-value sub-segment of the carbon black industry with gross
margin per tonne four to five times over that of rubber carbon black. The Indian specialty
black market of 49,000 MTPA is majorly served (92%) by imports. PCBL expects to increase its
high-end specialty black capacity by 32,000 MTPA to capture this domestic market while also
increasing its exports of specialty black. The increased contribution of specialty black in the
sales mix coupled with cost efficiencies is likely to increase PCBL’s EBITDA by ~INR 2,500/tonne
during FY18–20.
Outlook and valuations: Attractive prospects, limited downside; Initiate with BUY
Improved capacity utilisation levels of rubber carbon black, a shift in mix towards specialty
black, and operating efficiencies due to brownfield expansions are likely to drive growth in
the bottom line at a CAGR of 27% over FY18–20 with RoACE expected to improve by ~400
bps. The stock is currently trading at 16.4x and 13.6x FY19E and FY20E earnings, respectively.
We value the stock at 18x FY20E EPS of INR 93.6, resulting in a price target of INR 1,685 and
implying a 35% upside from the current levels.
Year to March FY16 FY17 FY18E FY19E FY20E
Revenues (INR Cr) 1,894 1,927 2,325 2,621 2,896
Rev growth (%) (23) 2 21 13 10
EBITDA (INR Cr) 165 258 372 477 572
Net Profit (INR Cr) 15 67 201 267 323
P/E (x) 65.0 21.8 16.5 13.6
EV/EBITDA (x) 19.8 13.7 10.6 9.1
RoACE (%) 5.2 9.1 14.2 17.2 18.3
RoAE (%) 2.1 6.3 16.6 19.1 19.7
CMP INR: 1,272
Rating: BUY
Target Price INR: 1,685
Upside: 35%
Jigar Jani
Research Analyst
Bloomberg: PHCB:IN
52-week
range (INR): 1,594.00 / 253.60
Share in issue (cr): 3.4
M cap (INR cr): 4,385
Avg. Daily Vol.
BSE/NSE :(‘000): 120
Promoter
Holding (%) 53.56
Date: 29th January 2018
Phillips Carbon Black Ltd
2 GWM
PCBL is expected to improve its RoACE by ~400 bps over FY18-20E while growing its bottomline at 27% CAGR over the same period largely driven
by the shift in mix towards specialty carbon black and consistently high utilization levels in its rubber carbon black segment due to supply tightness
PCBL’s profitability is likely
to improve as the share of
specialty carbon black in
its sales mix increases
PCBL’s RoACE / RoAE
profile is likely to improve
by ~410/ 310 bps over
FY18E-20E
We value PCBL at 18x
FY20E EPS of 93.6
considering the bottomline
growth and RoACE
improvement
FY16 FY17 FY18E FY19E FY20E
Sales 1,894 1,927 2,325 2,621 2,896
EBITDA 165 258 372 477 572
PAT 16 69 201 267 323
At CMP, FY20E P/E is
13.7x
At Target Price,
FY20E P/E is 18x
Upside of
35%
FY20E RoAE of
19.7% and Core
RoACE of 18.3%
FY16 FY17 FY18E FY19E FY20E
RoACE (%) 5.2 9.1 14.2 17.2 18.3
RoAE (%) 2.1 6.3 16.6 19.1 19.7
PE Multiple FY20E EPS CMP / Target
14x (CMP) 93.6 1272
18x (Target) 93.6 1685
Phillips Carbon Black Ltd
3 GWM
Price Target 1,685 Our price target is based on our base case scenario mentioned below and
applying an 18x multiple to the FY20E EPS of INR 93.6.
Bull
20x 2020E EPS of
INR 105.6
2,111
Assuming almost full utilisation of the brownfield rubber black capacity of
48,000 MT and of the specialty carbon black capacity would result in an EPS of
INR 106 for FY20E. Applying a 20x multiple to our bull case of FY20E EPS, we
arrive at a price target of INR 2,111/share.
Base
18x 2020E EPS of
INR 93.6
1,685
Assuming almost full utilisation of the brownfield rubber black capacity of
48,000 MT and 71% utilisation of the specialty carbon black capacity would
result in an EPS of INR 93.6 for FY20E. Applying an 18x multiple to our base case
multiple of 18x to the FY20E EPS, we arrive at a price target of INR 1,685/share.
Bear
15x 2020E EPS of
INR 69
1,035
Assuming 90% utilisation of the brownfield rubber black capacity of 48,000 MT
and 61% utilisation of the specialty carbon black capacity would result in an
EPS of INR 69.0 for FY20E. Applying a 15x multiple to our bear case multiple of
15x to the FY20E EPS, we arrive at a price target of INR 1,035/share.
Phillips Carbon Black Ltd
4 GWM
Average Daily Turnover (INR cr) Stock Price (CAGR) Relative to Sensex, CAGR (%)
3 months 6 months 1 year 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
107 77 47 471% 104% 69% 23% 442% 96% 56% 15%
Bu
sin
ess
Va
lue
Driv
ers
Nature of Industry
The carbon black industry is dominated by rubber carbon black used in tyres as reinforcing material.
Rubber carbon black markets are largely regional oligopolies. Specialty carbon black and non-tyre
carbon black are smaller markets, both in terms of tonnage and value, but significantly more
profitable than tyre rubber carbon black. The carbon black industry is fairly consolidated; the top 10
players account for 62% of capacity globally. The Indian carbon black market is highly consolidated,
hosting just four players.
Opportunity Size The global carbon black market was worth INR 82,000 cr as of 2016. Tyre rubber black is the largest
segment of this market at ~INR 58,000 cr; the non-tyre rubber goods segment is worth ~INR 15,000
cr; the specialty carbon black market is worth ~INR 9,000 cr.
Capital Allocation
PCBL is currently in the midst of a brownfield expansion of INR 320 cr to increase its specialty black
capacity by 32,000 MT and rubber carbon black by 48,000 MT. Another greenfield expansion worth
INR 480 cr is planned to set up incremental rubber carbon black capacity of 120,000 MT in either
Tamil Nadu or Andhra Pradesh.
Predictability
Gross profit per tonne is based on a fixed rupee/tonne margin over the raw material price
changes, which are passed through for rubber carbon black depending on a pricing ratio fixed at
the start of every year. The specialty carbon black market is priced by grades and enjoys 4–5x
higher profitability per tonne vis-à-vis rubber carbon black.
Sustainability
It is difficult to dislodge clients due to the high switching costs of tyre rubber carbon black (quality
checks and sourcing are line-based as each line that supplies to a tyre manufacturer has to be
approved). Consistency of supply in terms of volumes and the scope to expand globally would
ensure sustainability. The Indian specialty black market is currently served almost entirely through
imports, which presents enough scope for import substitution.
Disproportionate
Future
Expansion into specialty blacks is likely to increase gross profit per tonne sustainably, while the
imbalanced global-demand supply scenario is likely to ensure sustainability of volumes for rubber
carbon black.
Business Strategy &
Planned Initiatives The current focus is on shifting a mix towards specialty blacks and improving manufacturing
efficiencies.
Near-Term Visibility There is strong visibility for a 27% CAGR in the bottom line over FY18–20E.
Long-Term Visibility Greenfield expansion provides earnings visibility beyond FY20.
Phillips Carbon Black Ltd
5 GWM
Focus Charts – Story in a Nutshell
Largest Player in Domestic Carbon Black Industry (KTPA) Demand-Supply Scenario to Tighten Globally
Tyre Investments to be Concentrated in APAC and China Higher Coal Tar Prices Make Crude based CBFS
Competitive against CBO
PCBL to Raise High-end Specialty Black Capacity by > 4x Specialty Black and Operating Efficiences to Spur
EBITDA/Tonne
Source: Edelweiss Investment Research
502
315
12085
PCBL SKI India Himadri CCIL
77%79%
82%
85%86%
86%85%
77%
79%
81%
83%
85%
87%
8000
10000
12000
14000
16000
18000
2015 2016 2017f 2018f 2019f 2020f 2021f
KTP
A
Production (LHS) Capacity (LHS) Utilization (RHS)
China,
19%
North
Americ
a, 27%South
Americ
a, 1%
Europe
, 17%
Af/ME,
9%
Asia
excl.
China,
27%
$22 Billion in Total Investments in Tire
Industry between 2016-21Vietna
m,
19%
Indon
esia,
9%Bangl
adesh
, 6%Korea
, 5%Taiwa
n, 5%Others
, 5%
Thaila
nd,
29%
India,
22%
$5.9 Billion to be invested in Asia
Pacific excl. China
0.00
100.00
200.00
300.00
400.00
500.00
600.00
700.00
800.00
Ju
l-12
No
v-1
2
Ma
r-1
3
Ju
l-13
No
v-1
3
Ma
r-1
4
Ju
l-14
No
v-1
4
Ma
r-1
5
Ju
l-15
No
v-1
5
Ma
r-1
6
Ju
l-16
No
v-1
6
Ma
r-1
7
Ju
l-17
No
v-1
7
GC 3% Sulphur LO ($/MT) CBO ($/MT)
12000
12000
12000
20000
56000
0
10000
20000
30000
40000
50000
60000
Super Specialty
Black Capacity
FY17
Palej
Debottlenecking
New line by Sept
2018
New line by Mar
2019
Super Specialty
Black Capacity
FY20
MTP
A 6,663
9,211
10,645
11,699
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
FY17 FY18E FY19E FY20E
INR
Phillips Carbon Black Ltd
6 GWM
I. Largest rubber carbon black and high-end specialty black producer in India
The Indian carbon black industry is highly consolidated; capacity is concentrated with four
players that together account for ~1,022 KTPA worth of capacity. Globally, the industry is
fairly consolidated; the top 10 players account for 62% of global capacity.
PCBL is India’s largest carbon black producer (37% market share) and the seventh largest
worldwide, present in the carbon black market for over 55 years.
PCBL had a nameplate capacity of 472 KTPA as of FY17. It added another 30,000 MT by
debottlenecking capacity by December 2017, bringing total capacity to 502 KTPA. Out of
this, 478 KTPA is fungible capacity that can be used across rubber tyre black, MRG black
and low-end specialty black; the remaining 24 KTPA is on separate lines used for high-end
specialty black.
PCBL produces around 56 grades of carbon black spread across tyre rubber black, non-
tyre rubber black and specialty black, which require process switches. This leads to a peak
utilisation rate of 88% of the nameplate capacity.
PCBL has been steadily increasing its share in the overall carbon black production in India,
thus indicating market share gains, while export volumes vary at 24–31% of its total sales.
Current Carbon Black Capacity - India (KTPA) PCBL’s Current Plant-Wise Capacity
Source: Edelweiss Investment Research, PCBL
Global Carbon Black Capacity (KTPA) Domestic Market Share Rises for PCBL (KTPA)
Source: Edelweiss Investment Research, Notch Consulting
502
315
12085
PCBL SKI India Himadri CCIL
2,1332,010
1,2851,145
810
525 502 495 451 445
0
500
1,000
1,500
2,000
2,500
Ca
bo
t
Birla
Ca
rbo
n
OEC
Bla
ck C
at
CSR
C
Om
sk
PC
BL
Lon
gxin
g
Toka
i
Sid
Ric
ha
rdso
n
208 199 227 243294
468 463490 494
495
676 662
717 737789
0
100
200
300
400
500
600
700
800
FY13 FY14 FY15 FY16 FY17
KTP
A
PCBL Others
Location CB (MT) CPP (MW) Products Manufactured
Durgapur 1,47,000 30 ASTM, MRG, low-end
specialty black
Mundra 1,58,000 24 ASTM, MRG, low-end
specialty black
Palej 107,000 12 ASTM, MRG, low-end and
high-end specialty black
Kochi 90,000 10 ASTM, MRG, low-end
specialty black
Total 502,000 76
Phillips Carbon Black Ltd
7 GWM
II. Tight demand-supply scenario to ensure high utilisation
The tyre industry consumes 73% of the global volumes of carbon black and 70% of the value
of the industry, while the non-tyre rubber industry takes 19.7% of the volume and 18.3% of the
value.
The specialty carbon segment accounts for only 7% of the volumes, but 11.2% of the value,
given that these are products with higher realisations and margins.
KTPA – Kilo tons per annum
Source: Edelweiss Investment Research, Notch Consulting
As per Notch Consulting, worldwide carbon black utilisation levels are likely to increase from
the current levels of 82% to 86% by 2020–21 as demand is likely to outstrip supply additions
over the next four years. Demand is likely to improve by 3.8% over 2016–2021, even as supply
increases only at a 2% CAGR over the period.
Low utilisation rates over the past five years were largely the result of significant capacity
additions in China due to lower coal tar prices.
Historical Utilisation Rates Hovered Below 80% until 2016; Expected to Pick up to 86% by 2021
Source: Edelweiss Investment Research, Notch Consulting
A surge in demand is likely due to increased tyre production in developing economies, which
are likely to increase their rubber consumption at a 3.7% CAGR, almost twice the rate of
consumption in advanced economies.
Region 2006 2016 2021f %AGR
2006-2016
%AGR
2016-2021
Rubber Consumption (’000 tonnes) 21692 27281 31733 2.30% 3.10%
Tyre Markets 13313 17242 20182 2.60% 3.20%
Non-tyre Markets 8379 10039 11551 1.80% 2.80%
Advanced Economies 10462 9473 10410 -1.00% 1.90%
Developing Economies 11230 17808 21323 4.70% 3.70%
Source: Edelweiss Investment Research, Notch Consulting
70%
72%
74%
76%
78%
80%
82%
84%
86%
0
5000
10000
15000
20000
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17f
KTP
A
Production (LHS) Capacity (LHS) Utilization (RHS)
77%
79%
82%
85%86%
86%85%
77%
79%
81%
83%
85%
87%
8000
10000
12000
14000
16000
18000
2015 2016 2017f 2018f 2019f 2020f 2021f
KTP
A
Production (LHS) Capacity (LHS) Utilization (RHS)
World Carbon Black Market by Industry Volumes (KTPA)
Tyres , 9,014
Non Tyre Rubber Goods , 2,428
Specialty Markets ,
881
Tyres , 8,896
Non Tyre Rubber Goods , 2,307
Specialty Markets ,
1,410
World Carbon Black Market by Value (USD
mn)
12,323 KTPA $ 12,613 mn
Phillips Carbon Black Ltd
8 GWM
The tyre industry is likely to be the key driver of the carbon black industry and might see
over USD22 bn worth of investments during 2016–21. Asia is likely to see ~46% of these new
investments in the tyre industry, with Asia excl. China to see ~27% of this.
Source: Edelweiss Investment Research, Notch Consulting
Thailand and India are likely to see the highest investments in the tyre segment within the
Asia-Pacific region excl. China.
As per Notch Consulting, India is likely to need ~180 KT of incremental carbon black over
2016–21, which is the second largest demand gain among all countries, after China and
in line with that of the US. Moreover, apart from PCBL, only Himadri Specialty Chemicals
Limited intends to expand capacity by 30,000 tonnes (INR148 cr) over the next few years,
thus further upsetting the demand-supply equation.
Carbon Black Demand Forecast 2016–2021
Item 2016 (KT) 2021 (KT) Volume
Increase (KT)
Percent
Increase
World Total 12579 14750 2171 3.20%
China 4416 5400 984 4.10%
US 1490 1670 180 2.30%
India 795 975 180 4.20%
Thailand 473 590 117 4.50%
Indonesia 360 430 70 3.60%
Brazil 466 524 58 2.40%
Russia 279 335 56 3.70%
Vietnam 116 170 54 7.90%
Turkey 187 235 48 4.70%
Korea 444 485 41 1.80%
Source: Edelweiss Investment Research, Notch Consulting
The recent imposition of antidumping duties on Chinese TBR tyres (at USD250–450/MT) is
likely to result in incremental capacity utilisation for existing domestic tyre manufacturers.
China,
19%
North
America,
27%
South
America,
1%
Europe,
17%
Af/ME, 9%
Asia excl.
China,
27%
USD22 bn Investments in Tyre
Industry 2016–21
Vietnam,
19%
Indonesia
, 9%
Banglad
esh, 6%
Korea,
5%Taiwan,
5%Others,
5%
Thailand,
29%
India,
22%
USD5.9 bn to be Invested in Asia
Pacific excl. China
Phillips Carbon Black Ltd
9 GWM
III. Higher Chinese coal tar prices make crude-based CBFS more competitive
Carbon black production in China is mainly based on CBO. This oil is a by-product of
processing the waste obtained from coke oven batteries during steel production.
Manufacturers in other regions except China mainly use CBFS, which is a crude derivative.
Additions of carbon black capacity in China over 2010 to 2014 led to a significant shift in the
global feedstock mix. Coal tar replaced both local and US decant in 2011 as the largest
feedstock for carbon black production.
2004 Global Feedstock Mix – 14mn Tonnes 2016 Global Feedstock Mix – 21.3mn Tonnes
Source: Edelweiss Investment Research, Notch Consulting
Chinese coal tar prices declined until 2016, driving down the floor prices for carbon black
and pulling down realisations and profitability of carbon black producers worldwide that
used local/US decant oil as feedstock. After five years of volatility-induced decline,
Chinese coal tar prices rallied in 2017, almost tripling since the levels in November 2016.
The rally was primarily driven by the rising prices of raw materials and environmental
protection campaigns by the Chinese government on illegal polluters, which led to a
supply shortage. Moreover, demand from downstream products like coal tar pitch,
industrial naphthalene and phthalic anhydride sectors supported the higher prices of coal
tar.
CBO Prices Tripled Over Past 2 Years, Widening Spread with CBFS
Source: Edelweiss Investment Research, Company
Coal
Tar, 3550
Ethylene
Tar, 2500US
Decant,
5720
Local
Decant
, 2230
Coal Tar,
11100
Ethylene
Tar, 2300
US
Decant,
4600
Local
Decant,
3300
0.00
100.00
200.00
300.00
400.00
500.00
600.00
700.00
800.00
Ju
l-12
Oc
t-12
Ja
n-1
3
Ap
r-13
Ju
l-13
Oc
t-13
Ja
n-1
4
Ap
r-14
Ju
l-14
Oc
t-14
Ja
n-1
5
Ap
r-15
Ju
l-15
Oc
t-15
Ja
n-1
6
Ap
r-16
Ju
l-16
Oc
t-16
Ja
n-1
7
Ap
r-17
Ju
l-17
Oc
t-17
Ja
n-1
8
GC 3% Sulphur LO ($/MT) CBO ($/MT)
Phillips Carbon Black Ltd
10 GWM
The mentioned factors made other crude-based CBFS competitive vis-à-vis CBO. With
pollution concerns in China likely to remain high, we expect coal tar prices to remain
elevated in the future.
Cost Comparison of Carbon Black Feedstock in Asia
Source: Edelweiss Investment Research, CTC International
225
275
325
375
425
475
525
575
625
675
Jun - 11 Jun - 12 Jun - 13 Jun - 14 Jun - 15 Jun - 16 Jun - 17
(US$ p
er
ton
)
HSFO 180 (Singapore) Gulf Coast HS CBO (CIF SE Asia)
Anthracene Oil (China) Raw Coal Tar (China)
Phillips Carbon Black Ltd
11 GWM
IV. Antidumping duty on Chinese imports provides additional protection
China is one of the world’s largest carbon black exporters (along with Russia), exporting close
to 734 KT of carbon black in 2017. India takes in ~8% of these Chinese exports.
Leading Carbon Black Exporting Countries Chinese Exports by Destination
Source: Edelweiss Investment Research
China, South Korea, Russia and the US contribute 80–90% of Indian carbon black imports.
The introduction of antidumping duties on China, amounting to USD397/MT in November
2015, and an increase in coal tar prices slowed the dumping of carbon black into India from
China; Chinese imports declined substantially over the past two years. The antidumping
duties on Chinese carbon black are on until November 2020. India also levies antidumping
duties of USD36.17/MT on imported Russian carbon black, which saw a recent surge in 2017.
Country-wise Split of Carbon Black Imports in India
Source: Edelweiss Investment Research
0
100
200
300
400
500
600
700
800
Ch
ina
Ru
ssia
Ge
rma
ny
Ko
rea
Po
lan
d
Hu
ng
ary
Ca
na
da US
Tha
ilan
d
Ita
ly
Eg
yp
t
Ind
ia
(000 t
on
s)
2015 2016 2017f
Indonesia,
18%
Japan, 9%
Vietnam,
9%
India,
8%
Taiwan, 7%Malaysia,
5%
Korea, 4%
Others, 14%
Thailand,
26%
87,806
64,036 55,898
24,060
27,87626,599
3,768
6,70214,954
5,360
6,101 5,619
-10,000
10,000
30,000
50,000
70,000
90,000
1,10,000
1,30,000
1,50,000
FY2015 FY2016 FY2017
Ton
s
China Korea Russia USA Others
Phillips Carbon Black Ltd
12 GWM
V. Move towards specialty black to bring higher EBITDA/tonne
Specialty black is a niche, high-value sub-segment of the carbon black industry.
It is used as black pigment and as an additive to enhance material performance, including
conductivity, viscosity, static charge control and UV protection. This type of carbon black is
used in several applications in the coatings, polymers and printing industries as well as other
special applications.
Specialty Carbon Black: Market Overview
Application Key Attributes Customer Benefits End Products
Coatings
High jetness with bluish undertone
High solid & water-based coatings
Easy dispersal
Consistent quality
Enhanced colour performance
Furthers compliance with stricter
regulations
Improves process efficiency
Key to reputational positioning
Automotive coatings OEM and
refinish
Architectural paint
Industrial coatings
Polymers
Conductiveness
UV protection
Infrared absorption
Easy dispersal
Purity
Colour
Enhancement of high/ultra-high
voltage cables
Protection against polymer
degradation and subsequent
deterioration of mechanical
strength
Good processing properties and
easy handling
Improved properties for thermal
applications (for buildings, industrial
and HVAC)
Wire and cable jacketing and
conductive sheathing
Fibre pigmentation – replacing
dyes
Plastic piping for water, gas,
drainage
Engineered plastics for consumer
electronics and automotive
applications
Printing
Colour
Gloss
Wettability
Low abrasion
Contributes to packaging inks
approved for food contact
Rising customisation in packaging
inks due to variety of binder systems
Easy dispersability for toners and
conductive inks
Miniaturisation and less material in
black matrix
Packaging inks for labelling and
coding
Inkjet applications
Food-grade and food-contact
printing
Source: OEC Presentation
Specialty carbon black is USD1.4 bn global industry with annual volumes of ~900 KT sold
as of 2015. This market is expected to grow at a 8–10% rate over the next five years.
Plastics and inks account for 78% of the global carbon black market by volume and 72%
by value.
Source: Edelweiss Investment Research, Notch Consulting
Currently, non-rubber carbon black accounts for only 9% of PCBL’s sales volume and 12%
of its revenue. The company has a capacity of 24,000 MT at Palej for super-specialty non-
rubber carbon black, which is mainly used as a pigment in plastic applications.
69%
13%
4% 14%
Plastics Ink Toners Paints & Coatings Other Specialty
Specialty Carbon Black Volume - 915 KT (2015)
Specialty Carbon Black Value - USD1.4 bn (2015) –
59% 19%
10%
12%
Plastics Ink Toners Paints & Coatings Other Specialty
Phillips Carbon Black Ltd
13 GWM
PCBL Sales Volume – FY17 PCBL Revenue – FY17
Source: Edelweiss Investment Research, Company
Specialty Carbon Black Market Size (in MTPA)
Source: Edelweiss Investment Research, HSCL
PCBL currently is focussed on increasing penetration in high-end specialty carbon black
and recently de-bottlenecked capacity of 12,000 MT. The company is further planning to
increase capacity by ~32,000 MT in the specialty black segment over the next two years
to reduce dependence on imports, while also intending to capture specific export
markets.
PCBL Plans to Increase Specialty Black Capacity by 4x by FY20
Source: Edelweiss Investment Research
Non
Rubber,
9%
Rubber,
91%
Non
Rubber,
12%
Rubber,
88%
49000
915000
Indian Demand Global Demand
Specialty CB volumes are less than
5% of overall CB volumes in India
compared with ~10 % globally
12000
12000
12000
20000
56000
0
10000
20000
30000
40000
50000
60000
Super Specialty
Black Capacity FY17
Palej
Debottlenecking
New line by Sept
2018
New line by Mar
2019
Super Specialty
Black Capacity FY20
MT
Phillips Carbon Black Ltd
14 GWM
Specialty carbon black brings twice the realisations of normal rubber black and four–five
times the margins of normal rubber black, depending on the applications it is used for.
This can be seen by the difference between the rubber carbon black and specialty
carbon black range margins as reported by Orion Engineered Carbons (OEC), a global
leader in the carbon black industry. PCBL also derives ~20% of its EBITDA from the non-
rubber carbon black segment, but only 12% of its revenue.
Orion Engineered Carbons – Difference between Rubber Carbon Black and Specialty Black
Source: Edelweiss Investment Research
PCBL plans to increase its normal rubber black capacity by 48,000 MT, likely to come
online by the end of FY19. Overall capex for the incremental 80,000 MT of capacity (48,000
MT of rubber carbon black and 32,000 MT of specialty carbon black) is expected to be
INR 320 cr, likely to be funded largely through internal accruals.
727
18297
1596
734
565
0
200
400
600
800
1000
1200
1400
1600
1800
Revenue/ton Gross Profit/ton EBITDA/ton
EU
R/t
on
Rubber Carbon Black Specialty Carbon Black
Phillips Carbon Black Ltd
15 GWM
VI. EBITDA/tonne stabilises, improves over past three years
Tyre rubber carbon black prices trail the cost of carbon black feedstock (CBFS). Most
companies have a fixed contribution in absolute terms on a per tonne basis over and above
the cost of the raw materials for fixed overheads and margin. The spreads are decided with
each customer at the start of the year, based on the demand-supply scenario and inclusive
of fixed costs and margins. However, volatile CBFS prices might result in inventory gains or
losses, which cannot be passed on to the end consumer.
PCBL has seen a steady increase in EBITDA and gross profit/tonne over the past three years,
irrespective of overall end product prices, as it is able to maintain and improve its per-tonne
profitability after commencing production on its specialty black line. Also, PCBL’s
EBITDA/tonne dropped significantly in FY13 and FY14 due to foreign exchange losses and
hedging costs. The company since then started hedging its export positions completely, thus
bringing about almost negligible foreign exchange exposure. Adjusted for foreign exchange
losses and hedging costs, PCBL’s EBITDA/tonne steadily increased over the past five years, a
significant part of which was down to more volumes sold of specialty black.
EBITDA/Tonne (Adjusted for Forex Losses, Hedging Costs) Improved
Source: Edelweiss Investment Research
A transition of the mix towards specialty carbon black is likely to raise PCBL’s EBITDA/tonne
overall. We expect the EBITDA figure to rise from INR 6,663/tonne in FY17 to INR 11,536/tonne
in FY20.
Increasing Specialty Black Contribution, Improved Operating Leverage to Spur EBITDA/tonne
Source: Edelweiss Investment Research
2,452
842
4,817 4,928
6,663
3,679
4,615
6,4875,963
7,371
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
FY13 FY14 FY15 FY16 FY17
(IN
R)
EBITDA/Ton EBITDA/Ton adj. for forex losses and hedging costs
6,663
9,211
10,64511,699
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
FY17 FY18E FY19E FY20E
(IN
R)
EBITDA/Ton
Phillips Carbon Black Ltd
16 GWM
VIII. Power segment to contribute more as production hits peak utilisation
The production of carbon black begets a few polluting gases. Before 2003, PCBL had to
incinerate or flare up such gas for a cost. However, with the Electricity Act 2003 permitting
the sale of excess power generated by industries, PCBL commissioned power-generation
units at each of its facilities that could use these gases.
The power generation process involves the recovery and utilisation of thermal energy from
the processed waste gas (i.e., tail gas) generated from carbon black manufacturing. This
waste heat/gas is utilised to generate steam, which in turn is used to generate electrical
energy. PCBL currently produces ~1,300 units of electricity per MT of carbon black produced;
some units generate 1,500 units per MT, while others generate 1,100 units per MT. PCBL is
improving power-generation efficiency at all its units to bring them up to 1,500 units per MT.
Moreover, as utilisation levels across plants increase, power generation follows suit, leading
to more incremental revenue and profitability from the residual power sold to the grid. We
assume there are no efficiency gains currently from the power plants.
FY15 FY16 FY17 FY18 FY19 FY20
Power Sales (INR cr) 69 77 81 95 116 125
Power EBITDA (INR cr) 49 45 51 62 79 89
71% 58% 63% 65% 68% 71%
Power Generation (MU) 342 372 484 481 558 606
Power Export (MU) 199 225 304 306 376 404
Power Internal (MU) 143 147 180 174 182 202
Capacity (MU) 405 432 498 525 583 635
Utilisation (%) 84% 86% 97% 91% 96% 95%
Price (INR/unit) 3.5 3.4 2.7 3.1 3.1 3.1
Waste Gas
Waste gas
generated at CB
plant
Waste Gas co-
generation plantElectricity
Enternal plant
requirement
Surplus power sold to
grid
Incineration
Earlier
Now
Phillips Carbon Black Ltd
17 GWM
IX. Greenfield capex plans to boost bottom line after FY20
PCBL plans a greenfield capex project of 1.2 lakh tonnes at a cost of INR 480 cr, expected to
be set up either in Tamil Nadu, where it already has land, or in Andhra Pradesh, if that state
government sweetens term deals in terms of incentives and tax sops.
Although the details of the project are yet to be finalised, we believe it is likely to support the
company’s growth after FY20.
Greenfield Project Dynamics at Full Utilisation
INR cr (unless otherwise mentioned) Comments
Investment 480 Capex based largely on internal
accruals
Capacity (Tonnes) 1,20,000 Nameplate capacity
Sales (Tonnes) 1,05,600 Assuming 88% based on current plants
Contribution/Tonne (INR) 15,000 Assuming normal fungible rubber black
capacity
Fixed Cost/Tonne (INR) 3,000
Lower fixed cost per tonne as new
plant would be largely automated,
with firm level costs not increasing
proportionately
EBITDA/tonne (INR) 12,000
Carbon Black EBITDA 127
Power EBITDA 24 Assuming 1,500 units/tonne produced
and 450 units/tonne used internally
DA 24 Straight line depreciation for 20 years
EBIT 127
Interest 19 Assuming 10% interest on 40% capex
(INR192 cr)
PBT 108
Tax 28% Effective tax rate currently
PAT 77
EPS (INR) 22
Phillips Carbon Black Ltd
18 GWM
PCBL: Key Milestones
Key Clientele
1960-2004
Capacity: 270KT
2009
Mundra: 90KT
2012
Mundra & Durgapur:
62KT
2013
Kochi: 50KT
PCBL Capacity: 472 KT
Rubber Blacks
Rubber &
Specialty Blacks
Diversified
Customer
Base
Phillips Carbon Black Ltd
19 GWM
Global Reach in Over 30 Countries
Source: Edelweiss Investment Research
Americas
BRAZIL
PERU
Africa
NIGERIA
ETHOPIA
KENYA
SOUTH AFRICA
Africa
Saudi Arabia
UAE
TURKEY
IRAN
Europe
Asia
CHINA
HONG KONG
NEPAL
ISRAEL
JAPAN
MALAYSIA
INDONESIA
PHILLIPINES
SINGAPORE
KOREA
TAIWAN
THAILAND
VIETNAM
BANGLADESH
SRI LANKA
Phillips Carbon Black Ltd
20 GWM
Valuation and peers
PCBL is the largest carbon producer in India and is likely to register earnings CAGR of 93% over
FY17–20, largely driven by the brownfield expansion in specialty black and improving operating
efficiencies. Moreover, the company’s ROCE profile is similar to that of OEC, which is one of the
largest specialty black producers in the world. We initiate coverage with a BUY rating, valuing
PCBL at 18x FY20E P/E. We thus arrive at a target price of INR 1,685, implying an upside of 35% from
the current levels.
Estimated EPS (FY20E) Target multiple Target price
93.6 18x 1685
International Peer Comparison
Name Market
Cap EV
EBITDA
Margin -
FY1 (%)
EBITDA
Margin -
FY2 (%)
PAT Margin
- FY1 (%)
PAT Margin
- FY2 (%)
P/E -
FY1
P/E -
FY2
EV/EBITDA
- FY1
EV/EBITDA
- FY2
ROE -
FY1
ROE -
FY2
Cabot Corp 26,616 31,791 18% 18% 5% 6% 18.3 16.7 9.6 9.1 15.5 16.0
Orion Engineered
Carbons SA 10,877 14,854 16% 18% 6% 6% 17.7 15.9 9.7 8.2 133.7 94.4
Tokai Carbon Co
Ltd 21,212 20,226 10% 14% -2% 4% NA 22.3 29.3 15.2 9.2 16.3
Phillips Carbon
Black Ltd 4,385 5,090 16% 18% 9% 10% 21.8 16.4 13.7 10.6 16.6 19.1
Source: Bloomberg, Edelweiss Investment Research
Domestic Peer Comparison
Name Market
Cap EV
EBITDA
Margin -
FY1 (%)
EBITDA
Margin -
FY2 (%)
PAT Margin
- FY1 (%)
PAT Margin
- FY2 (%)
P/E -
FY1
P/E -
FY2
EV/EBITDA
- FY1
EV/EBITDA
- FY2
ROE -
FY1
ROE -
FY2
Oriental Carbon
& Chemicals Ltd 1,362 1,417 28% 29% 5% 6% 21.4 17.2 13.3 11.3 18.7 18.4
NOCIL Ltd 3,405 3,290 25% 25% 24.8 21.6 14.9 13.1
Phillips Carbon
Black Ltd 4,385 5,090 16% 18% 9% 10% 21.8 16.4 13.7 10.6 16.6 19.1
Source: Bloomberg, Edelweiss Investment Research
Phillips Carbon Black Ltd
21 GWM
Key Management
Name Designation Profile
Mr. Sanjiv Goenka Chairman and Executive
Director
Mr. Sanjiv Goenka is currently the chairman of the RP-Sanjiv
Goenka group. He is currently the honorary Consul General of
Canada in Kolkata. In April 2001, he took over as the youngest-
ever President of the Confederation of Indian Industry (CII), was
appointed Chairman of the Board of Governors of the Indian
Institute of Technology, Kharagpur (IIT-KGP) and currently serves
on the Board of the Indian Institute of Management, Kolkata (IIM-
Kolkata). He was a member of the Prime Minister’s Council on
Trade & Industry and is also the current Chairman of the Board of
Directors of Woodlands Medical Centre Ltd, Kolkata.
Mr. Kaushik Roy Managing Director
Mr. Kaushik Roy has vast multi-functional business experience of
over two decades across different sectors such as tyres and
cement. Before PCBL, he was associated with Apollo Tyres Limited
in various leadership roles and was also a board member of the
company.
Mr. Roy took on the leadership of PCBL from January 2013. He
holds an M. Tech (Mechanical) degree from IIT- Kharagpur and is
an alumnus of IMD-Switzerland. He also holds a degree in Business
Administration from the University of Tokyo. He is a member of the
Managing Committee of the Bengal Chamber of Commerce and
Industry (BCC&I). Presently he is on the Board of Harrisons
Malayalam Limited (HML) and STEL Holdings Limited (STEL)
Mr. Shashwat Goenka Board of Directors
Mr. Shashwat Goenka has joined the company’s Board of
Directors from 1 September 2014. He graduated from The Wharton
School, University of Pennsylvania with a Bachelor of Science in
Economics, specializing in finance, marketing and management.
He has worked with companies like NestléIndia Limited and KPMG
India. Presently he is on the Board of Firstsource Solutions Limited,
Spencer International Hotels Limited and Retailers Association of
India.
Mr. Raj Kumar Gupta Chief Financial Officer
Mr. Raj Kumar Gupta has rich professional experience of over 20
years in the areas of Treasury Management, Project Finance,
Working Capital Management, Taxation and Business Planning.
He started his career with CESC Limited a fully integrated Power
Generation & Distribution Company as part of the Finance team
and has moved to Phillips Carbon Black Ltd. around three years
back as Chief Financial Officer. He is a commerce graduate, a
Chartered Accountant and a Cost Accountant.
Key Risks
Inability to realise incremental sales volumes in the specialty black market
Any sharp movement in crude oil prices that bring inventory losses
Relaxation of environmental laws in China
Sharp fall in coal tar prices that could hit realisations of carbon black
Phillips Carbon Black Ltd
22 GWM
Business Overview
Company Brief
Phillips Carbon Black Ltd. (PCBL) is the leading producer of carbon black in India and also the world’s seventh largest. PCBL
plans a brownfield expansion of 32,000 MT of high-end specialty black and 48,000 MT of rubber carbon black over the next
two years for capex of INR 320 cr. It also plans a greenfield expansion of rubber carbon black of 1,20,000 MT after FY20 for
an estimated capex of INR 480 cr.
Business Model
PCBL is India’s largest producer of carbon black, which is mainly used as a reinforcement
material in tyre and other rubber products. The company is also among the country’s
largest producers of specialty carbon black, which is used as a pigment, conducive
material or for UV protection.
Strategic Positioning The company is the largest carbon black producer in India and the seventh largest
worldwide.
Competitive Edge
Largest producer of rubber carbon black in India, which brings advantages of scale
Largest producer of specialty carbon black in India; significant expansion in this high-
margin business
Consistency in quality and quantity for major customers
Strong brand and distribution network
Financial Structure Most of the brownfield and greenfield capex projects is to be funded with internal
accruals.
Key Competitors Birla Carbon, Continental Carbon India Limited, Himadri Specialty Chemicals Limited
Industry Revenue Drivers
Significant tyre capex in India over the next five years is likely to drive the demand for
rubber carbon black; the specialty carbon black market is currently completely served by
imports.
Shareholder Value
Proposition
We initiate coverage with a BUY rating, valuing PCBL at 18x FY20E P/E and thus arrive at a
target price of INR 1685.
Phillips Carbon Black Ltd
23 GWM
VII. Financial Analysis
Sales growth a combination of volume growth and changes in mix
PCBL’s revenue growth moves largely in line with feedstock prices as rubber carbon black (the
highest contributor to revenue) has a pass-on clause for feedstock prices, which are related to
crude oil and coal tar prices. We expect rubber carbon black prices to remain at the current
levels, while revenue would likely increase when the mix shifts towards specialty carbon black.
Net Sales Transition
Source: Edelweiss Investment Research
EBITDA/tonne to increase due to operating leverage and shift of mix towards specialty black
PCBL commands a fixed rupee/tonne margin over the raw material feedstock prices, depending
on the margin and fixed-cost overheads. However, specialty black prices are fairly stable, based
on the grades produced; these have contributed 4–5 times more per tonne as against normal
rubber black grades. We expect EBITDA and per-tonne contribution to improve substantially as
the mix changes more in favour of specialty black products.
EBITDA/Tonne adj. for forex and hedging costs to Improve as Mix Moves to Specialty Black
Source: Edelweiss Investment Research
PAT and PAT margin to improve substantially
We expect PAT to compound at a rate similar to the EBITDA, resulting in PAT increasing at a 27%
CAGR over FY18–20. PAT in FY13–15 was hit by forex losses and hedging costs. The company has
since FY16 adopted an approach that involves hedging majority of its forex exposure.
PAT Transition
Source: Company, Edelweiss Investment Research
2,285 2,2772,470
1,894 1,927
2,3252,621
2,896
0
500
1,000
1,500
2,000
2,500
3,000
3,500
FY13 FY14 FY15 FY16 FY17 FY18E FY19E FY20E
(IN
R c
r)
3,6794,615
6,487 5,9637,371
9,21110,645
11,699
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
FY13 FY14 FY15 FY16 FY17 FY18E FY19E FY20E
(IN
R)
-22
-87
10 1669
201
267323
-200
-100
0
100
200
300
400
FY13 FY14 FY15 FY16 FY17 FY18E FY19E FY20E
(IN
R c
r)
Phillips Carbon Black Ltd
24 GWM
Leverage to remain at current levels as greenfield capex to be partly funded with debt
We expect leverage in terms of Net debt to Equity to remain near current levels inspite of strong
operational cash flows as we expect the new greenfield capex at either Tamil Nadu or Andhra
Pradesh is expected to be partly funded by debt.
Leverage likely to remain at current levels
Source: Company, Edelweiss Investment Research
ROAE to improve as mix changes towards specialty carbon blacks
We expect ROE to improve on the back of mix change towards specialty blacks which is likely to
drive up net profit margins improving ROAE by 310 bps over FY18-20E.
ROAE to reach ~20% till FY20E
Source: Company, Edelweiss Investment Research
1.37
2.152.38
0.930.65 0.55 0.46 0.46
0.00
0.50
1.00
1.50
2.00
2.50
FY13 FY14 FY15 FY16 FY17 FY18E FY19E FY20E
(X)
0.7 0.7 0.8 0.5 0.5 0.6 0.6 0.6
5.3 5.8 5.94.5 3.5 3.2 3.0 2.9
-1.0-3.8
0.40.8 3.6
8.7 10.2 11.1
-5.0
0.0
5.0
10.0
15.0
20.0
FY13 FY14 FY15 FY16 FY17 FY18E FY19E FY20E
(%)
Phillips Carbon Black Ltd
25 GWM
Appendix
Carbon Black Applications
1 – Mechanical Rubber Goods
2 – American Society of Technical Manufacturers
Source: Edelweiss Investment Research
Specialty Grades
• Coating, Polymers, Printing Inks,
Specialty Applications (e.g. Batteries)
• Relatively smaller volumes/SKUs, some
volumes sold through distributors
• High margins relative to Rubber
• Global market
Technical Tire and MRG (1)
• Extrusion Molding
• High Performance Tires
• Smaller volumes
• High margins relative to standard Tire
ASTM Soft Black
• Tire Carcass
• Large volumes, sold directly to global tire producers
• Average rubber industry margins
• Almost exclusively regional markets
ASTM(2) Hard Black
• Tire Tread
• Conveyor Belts
• Construction Profiles
• Damping Elements
• Hoses
• Transmission Belts
• Molded Goods
• Seals
• Rubber-to-Metal Bonding
• Unvulcanised Sheets
• Adhesives
• Tubing
• Passenger Vehicle Tire
• Truck and Bus Tire
• Off-Highway Tires
• Agricultural Tires
• Original Equipment
manufacturer (“OEM”) Tires
• Replacement Tires
• Motorcycle Tires
• Aircraft Tires
• Racing Tires
Phillips Carbon Black Ltd
26 GWM
Financials
Income statement (INR crs)
Year to March FY16 FY17 FY18E FY19E FY20E
Income from operations 1894 1927 2325 2621 2896
Total operating expenses 1729 1669 1953 2144 2324
EBITDA 165 258 372 477 572
Depreciation and amortisation 62 61 63 70 82
EBIT 103 198 309 407 490
Interest expenses 72 51 49 53 58
Profit before tax 47 165 279 371 448
Provision for tax 31 96 78 104 126
Core profit 16 69 201 267 323
Extraordinary items -1 -1 0 0 0
Profit after tax 15 67 201 267 323
Adjusted net profit 15 67 201 267 323
Equity shares outstanding (mn) 3 3 3 3 3
EPS (INR) basic 4 20 58 78 94
Diluted shares (Cr) 3 3 3 3 3
EPS (INR) fully diluted 4 20 58 78 94
Div idend per share 3 6 12 16 19
Div idend payout (%) 54 30 20 20 20
Common size metrics- as % of net revenues (INR crs)
Year to March FY16 FY17 FY18E FY19E FY20E
Operating expenses 91.3 86.6 84.0 81.8 80.3
Depreciation 3.3 3.1 2.7 2.7 2.8
Interest expenditure 3.8 2.7 2.1 2.0 2.0
EBITDA margins 8.7 13.4 16.0 18.2 19.7
Net profit margins 0.8 3.5 8.7 10.2 11.1
Growth metrics (%)
Year to March FY16 FY17 FY18E FY19E FY20E
Revenues (23.3) 1.7 20.6 12.7 10.5
EBITDA 9.4 56.3 44.2 28.2 19.8
PBT 292.5 247.4 69.6 32.8 20.8
Net profit 53.5 331.4 192.9 32.8 20.8
EPS 39.6 363.4 198.1 32.8 20.8
Ratios
Year to March FY16 FY17 FY18E FY19E FY20E
ROAE (%) 2.1 6.3 16.6 19.1 19.7
ROACE (%) 5.2 9.1 14.2 17.2 18.3
Debtors (days) 84 88 75 75 75
Current ratio 2.2 1.6 2.2 2.2 2.2
Debt/Equity 1.0 0.7 0.6 0.5 0.5
Inventory (days) 47 46 45 45 45
Payable (days) 70 88 60 60 60
Cash conversion cycle (days) 62 47 60 60 60
Debt/EBITDA 6.2 2.9 2.0 1.6 1.6
Adjusted debt/Equity 0.9 0.6 0.5 0.5 0.5
Valuation parameters
Year to March FY16 FY17 FY18E FY19E FY20E
Diluted EPS (INR) 4.2 19.6 58.4 77.5 93.6
Y-o-Y growth (%) 39.6 363.4 198.1 32.8 20.8
CEPS (INR) 23 38 77 98 117
Diluted P/E (x) 301.1 65.0 21.8 16.4 13.6
Price/BV(x) 4.2 3.9 3.4 2.9 2.5
EV/Sales (x) 2.8 2.7 2.2 1.9 1.8
EV/EBITDA (x) 32.4 19.8 13.7 10.6 9.1
Diluted shares O/S 3.4 3.4 3.4 3.4 3.4
Basic EPS 4.2 19.6 58.4 77.5 93.6
Basic PE (x) 301.1 65.0 21.8 16.4 13.6
Div idend yield (%) 0.2 0.5 0.9 1.2 1.5
Balance sheet (INR crs)
As on 31st March FY16 FY17 FY18E FY19E FY20E
Equity share capital 34 34 34 34 34
Preference Share Capital 0 0 0 0 0
Reserves & surplus 1,010 1,096 1,257 1,471 1,729
Shareholders funds 1,045 1,131 1,292 1,505 1,764
Secured loans 811 602 602 602 713
Unsecured loans 210 156 156 156 185
Borrowings 1,022 758 758 758 898
Minority interest 7 6 6 6 6
Sources of funds 2,073 1,895 2,056 2,269 2,668
Gross block 1,478 1,506 1,636 1,886 2,306
Depreciation 62 123 186 256 338
Net block 1,416 1,383 1,450 1,630 1,968
Capital work in progress 80 80 100 100 100
Total fixed assets 1,496 1,463 1,550 1,730 2,068
Unrealised profit 0 0 0 0 0
Investments 228 295 240 200 200
Inventories 244 244 287 323 357
Sundry debtors 438 466 478 539 595
Cash and equivalents 52 26 53 73 83
Loans and advances 84 36 43 49 54
Other current assets 0 0 0 0 0
Total current assets 819 771 860 984 1,089
Sundry creditors and others 361 462 382 431 476
Provisions 4 8 8 9 9
Total CL & provisions 365 470 390 439 485
Net current assets 454 301 470 544 604
Net Deferred tax -147 -205 -205 -205 -205
Misc expenditure 43 41 0 0 0
Uses of funds 2,073 1,895 2,056 2,269 2,668
Book value per share (INR) 303 328 375 437 512
Cash flow statement (INR crs)
Year to March FY16 FY17 FY18E FY19E FY20E
Net profit 17 70 201 267 323
Add: Depreciation 62 61 63 70 82
Add: Misc expenses written off 30 3 41 0 0
Add: Deferred tax 120 57 0 0 0
Gross cash flow 229 190 305 338 405
Less: Changes in W. C. -257 -127 142 54 50
Operating cash flow 486 317 162 284 355
Less: Capex 627 28 150 250 420
Free cash flow -141 290 12 34 -65
Phillips Carbon Black Ltd
27 GWM
Edelweiss Broking Limited, 1st Floor, Tower 3, Wing B, Kohinoor City Mall, Kohinoor City, Kirol Road, Kurla(W)
Board: (91-22) 4272 2200
Vinay Khattar
Head Research
Rating Expected to
Buy appreciate more than 15% over a 12-month period
Hold appreciate between 5-15% over a 12-month period
Reduce Return below 5% over a 12-month period
0
500
1000
1500
2000
2500
3000
Jan
-14
Ma
r-1
4
Ma
y-1
4
Jul-1
4
Se
p-1
4
No
v-1
4
Jan
-15
Ma
r-1
5
Ma
y-1
5
Jul-1
5
Se
p-1
5
No
v-1
5
Jan
-16
Ma
r-1
6
Ma
y-1
6
Jul-1
6
Se
p-1
6
No
v-1
6
Jan
-17
Ma
r-1
7
Ma
y-1
7
Jul-1
7
Se
p-1
7
No
v-1
7
Jan
-18
(In
de
xe
d)
Phillips Carbon Sensex
Disclaimer
28 GWM
Edelweiss Broking Limited (“EBL” or “Research Entity”) is regulated by the Securities and Exchange Board of India (“SEBI”) and is licensed to carry on the business of broking, depository
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[email protected] Corporate Office: Edelweiss House, Off CST Road, Kalina, Mumbai - 400098; Tel. 18001023335/022-42722200/022-40094279
This Report has been prepared by Edelweiss Broking Limited in the capacity of a Research Analyst having SEBI Registration No.INH000000172 and distributed as per SEBI (Research Analysts)
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Disclaimer
29 GWM
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Disclosures under the provisions of SEBI (Research Analysts) Regulations 2014 (Regulations)
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