 "This specialty chemicals stock zoomed 48% in a month; here's why")
In the past one month, the stock of this specialty chemicals has zoomed 48 per cent on strong performance in June quarter (Q1FY24) and positive outlook for financial year 2023-24 (FY24). In comparison, the S&P BSE Sensex was down nearly 2 per cent in a month.
The company is primarily engaged in manufacturing of carbon materials and chemicals. For Q1FY24, HSCL more-than-doubled its standalone profit after tax at Rs 88 crore, as compared to Rs 39 crore in a year-ago quarter.
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Earnings before interest, taxes, depreciation, and amortisation (Ebitda), too, increased 54 per cent year-on-year to Rs 131 crore. Revenues, however, decreased by 9 per cent to Rs 951 crore in Q1FY24.
HSCL is set to capitalise on emerging growth opportunities in the industry. The company has outlined its expansion strategy concerning the business segments that deal with lithium-ion batteries (LiB). In the years ahead, it will address the global demand for the crucial supply chain needed for LiB.
The LiB technology has evolved and stabilised over the last few decades to become commercially feasible across all segments, especially electric vehicles, energy storage and consumer electronics. Other alternative technologies will undergo a development curve to attain technical and commercial feasibility.
"LiB will be a frontrunner technology and a key global growth driver for next few decades," believes the management.
Analysts at ICRA said that a significant improvement in HSCL’s operating profit in FY23 compared to FY22 and FY21, driven by higher Ebitda/MT will likely sustain going forward.
The improvement in operating profit in FY23 supported overall financial risk profile, reflected in improved debt coverage metrics and healthy cash and bank balances, said the credit ratings agency.
Moreover, the outlook revision also factors in the increasing share of specialty carbon black (SB) in the company’s sales, which is likely to support the Ebitda/MT, going forward.
"The reaffirmation of the ratings continues to factor in the company’s long track record, its large scale and the backward integrated nature of its manufacturing operations. Further, HSCL has a strong market position in the domestic coal tar pitch (CTP) and carbon black (CB) businesses with established relationships with customers and suppliers. The ratings also favourably factor in the company’s diversified products, which find usage in the aluminium, graphite, tyres, mechanical rubber goods, plastics, dyes and other chemical-related product manufacturing industries," added analysts at ICRA.