PCBL Chemical rises 25% on supply, export and earnings hopes
PCBL Chemical has seen a 25% stock increase due to anticipated higher carbon-black prices. The company expects improved export prospects and a recovery in earnings. It has shifted some export volumes to the domestic market for better pricing. Management anticipates cost savings from various optimizations and a significant increase in Ebitda. Analysts have upgraded the stock rating, reflecting…
Shares of PCBL Chemical, a carbon black and specialty chemicals manufacturer, have surged 25% in the past six months, driven by investor optimism around rising realizations due to tighter carbon-black supply, improved export prospects and an earnings recovery. The company's pricing of carbon black, which makes up about 80% of its revenue, is anticipated to improve as disruptions at Russian refineries tighten supplies.
Tight global supply is also seen as aiding PCBL's expansion of exports to the US and Europe. PCBL's stock trades at a price-earnings (P/E) multiple of 48.7, higher than its three and five-year averages of 34.5 and 25, suggesting a premium for the expected strong future earnings. In the first quarter, the company redirected some export volumes to the domestic market, where value per tonne was higher, due to expensive and unpredictable freight costs making overseas sales less appealing.
Moreover, a more favorable domestic pricing environment, with lower Russian supplies and higher-priced Chinese imports, reduced pressure from low-cost imports. PCBL's management expects shipping conditions and tariff advantages to improve, leading to higher export volumes from the September quarter onward, especially in the US and subsequently Europe.
The firm is also targeting higher-value products to boost operating profit before depreciation and amortisation (EBITDA). PCBL anticipates its cost-optimization program, which includes feedstock diversification, procurement, and efficiency improvements, will generate ₹200-250 crore in savings over the next four to six quarters, providing an extra boost to profitability without a significant increase in revenue.
Management has kept guidance for a 14-15% improvement in average carbon-black EBITDA per tonne to ₹16,500-17,000 for FY27. Analyst PL Capital upgraded the stock to Buy from Accumulate, valuing it at 25 times FY28 EPS and revised the price target to ₹391 from ₹388. The stock closed 2% higher at ₹326.9 on the BSE on Wednesday.
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