PCBL rallies 6% on securing two patents; stock up 80% since April

Shares of PCBL hit a new high of Rs 208.80, as they rallied 6 per cent on the BSE in Thursday’s intra-day trade in an otherwise range-bound market after the company was granted two patents by the Indian Patent Office. In comparison, the S&P BSE Sensex was quoting flat at 66,464 at 11:35 AM.

In a regulatory filing, PCBL informed that it received patents: one for the process i.e., innovative process of PCBL for modifications of specialty grade carbon blacks for inks and coating applications and second for the product i.e., innovative carbon black (CB) composition developed by PCBL to improve fuel efficiency and tyre life.

PCBL (erstwhile Phillips Carbon Black) is the leading manufacturer of carbon black, which is used as a reinforcing material in tyres. PCBL also derives around 9 per cent of sales volume from speciality carbon black, which fetches high margins and finds application in paints, plastics among others.

PCBL has successfully completed the first phase of its Greenfield Project in Chennai, Tamil Nadu. Upon its full completion expected in FY24, this project will augment the company’s carbon black capacity to 147,000 MTPA and contribute an additional 24 MW of green power.

The growing demand for specialty chemicals has prompted major manufacturers to bolster their production capacities and transition their production lines from standard carbon black to specialty variants. Companies are actively investing in research and development centres, positioning themselves for a competitive edge in the specialty chemicals. These strategic measures demonstrate a confident and prudent approach to meeting the evolving market needs and capitalising on the opportunities ahead, PCBL said in its FY23 annual report on future outlook.

In past one month, PCBL has outperformed the market by surging 30 per cent, as compared to 1 per cent decline in the S&P BSE Sensex. Since April, thus far in the financial year 2023-24, the share price of RP-Sanjiv Goenka (RP-SG) group company has zoomed 80 per cent.

With a large proportion of CB sales being made to tyre companies (around 70 per cent in FY23) where the pricing is formula driven and linked to movement in raw material prices, the company has been able to pass on the increase in input prices to a large extent. Furthermore, the increase in the sales of specialty CB, which is a value-added product and commands higher margin has contributed to the increase in the spread, according to analysts.

PCBL is likely to maintain its dominant market position which coupled with favourable demand scenario shall enable it to sustain its healthy business risk profile over the medium term. Furthermore, the financial risk profile is expected to remain strong amidst healthy cash flow generation from operations and the ongoing capex is not expected to result in major deterioration in the credit risk profile over the medium term, CARE Ratings said in its rationale.

Meanwhile, ICICI Securities hold a positive view on PCBL amid healthy volume growth in the offing, increasing share of speciality grade carbon black, consequent rise in margins and return rations, inexpensive valuations and healthy balance sheet.

According to the brokerage firm, PCBL is steadily progressing onto its path of being more of a technology led company rather being a commodity player. Share of speciality black is on a constant rise with FY23 sales pegged at ~40k tonne at 9 per cent of total sales volume which on the back of development of new grades and commissioning of new brownfield capacity is slated to increase to 60k tonne by FY25E at 11 per cent of total sales volume.