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Friday, May 1, 2009

Phillips Carbon Black Ltd:-An emerging bluechip

Scripscan:Phillips Carbon Black Ltd
Traded in:Nse-bse

Story:PHILLIPS CARBON Black, part of the RP Goenka group, is India''s largest manufacturer of carbon black, a key input for the tyre industry. After a phase of stagnant production and sales growth, the company has now entered a growth phase. Considering the rising demand for tyres in India and a shift in global carbon black capacity to the Asian region from the developed world, the company has expanded its capacity.Another revenue-driver for the company is sale of surplus power from the co-generation plants it plans to set up at all its facilities. The company has also obtained approvals for selling carbon credit and has begun to earn some revenues from it.All these factors make Phillips Carbon an interesting growth story and investors with a 12-15 month horizon can invest in the stock.Founded in 1960, Phillips Carbon is one of the three carbon black manufacturers in India.This capacity is spread across three facilities with the Durgapur unit in West Bengal accounting for little over half of it.The domestic carbon black industry is globally competitive and its quality matches international standards.The company is also investing in a co-generation plant based on waste-heat recovery at all its units. Nearly 80% of the power will be available for sale to the state electricity boards with incremental revenues of over Rs 90 crore. With PBIT margin of 87% at its co-generation business, this will add around Rs 75 crore to the company''s PBIT during FY09.Besides providing it with cash flows, the power business will de-risk the company''s finances from the fluctuation in feedstock prices, which are pegged to international crude oil prices.Though there are no other pure-play carbon black companies listed in India, Phillips Carbon''s P/E multiple is very low compared to similar-sized chemical companies.The stock has the potential to offer good returns to investors.

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