Valuation and risks: Our estimates have marginally been revised due to more than expected demand and a revival in commercial vehicles. We value OCCL using DCF methodology to arrive at a fair value TP of Rs1,150 (implied FY23 P/E of 11.6x and implied FY23 EV/EBITDA of 7.4x) and maintain a BUY rating. Key risks to our thesis...

We continue to like OCCL as demand for IS continues to move northwards with increase in capacity utilization of tyre makers. We retain BUY with a target price of Rs 1093 (Rs 973 earlier).

INDIA l Institutional Research l Chemical l 6 November 2020 Oriental Carbon & Chemicals l BUY l TP: 1,030 Amber product showing green shoots Better domestic sales than exports: 2QFY21 saw the revenue decline by 6% YoY to Rs905mn. This decline was primarily due to lower volume and realisation of sulphuric acid and greater domestic sales i.e. OCCL maintained a domestic/export IS revenue split of ~45%/55% in IS. Lower depreciation and finance cost along with higher other income aided the bottom line leading to a growth of 26% YoY. The PAT...

We retain BUY with target price of Rs 983 (16% upside) on back of expected recovery in Tyres segment leading to rise in demand for IS. Resurfacing of Covid cases and extended lockdown remain key risk to our assumptions.

Valuation and risks: We value OCCL using DCF methodology to arrive at a TP of Rs1,029 and maintain a BUY rating. Our estimates have marginally been revised with a minor TP change to Rs1,027 from Rs1,091. Key risks to our thesis are...

Oriental Carbon & Chemicals (OCCL) manufacturers insoluble sulphur, an essential compound used as a vulcanisation agent in manufacturing tyres. It is a direct play on domestic and global tyre industry. Hence, with a steady state replacement market for tyres and increasing pace of radialisation, OCCL's business prospects are firm. It operates in an oligopolistic market structure with only three credible players in the international market & OCCL being sole player domestically. Its global market share is ~10% (market size ~3,00,000 tonne) while domestic market share is ~55-60% (market size...

We initiate coverage on Oriental Carbon & Chemicals (OCCL) with a BUY and TP of Rs1,287. OCCL, India's leading Insoluble Sulphur (IS) manufacturer, has consistently registered higher EBITDA margins and cash flow generation capacity along with a rising market share over the last 10 years in an oligopolistic industry for a critical tyre component. In the light of growing IS demand, OCCL is increasing its capacity, which it has efficaciously done before, and is poised to benefit from higher IS demand due to growth in high-performance tyres and rising radialisation of...

In Q1FY20, OCCL reported standalone revenue of Rs. 93 cr, up 2% Y-o-Y, down 9% Q-o-Q), EBITDA of Rs. 26 cr (down 7% Y-o-Y, down 20% Q-o-Q). PAT stood at Rs. 23cr (up 38% Y-o-Y, down 19% Q-o-Q).

In Q4FY19, OCCL reported std. revenue of Rs. 103 Cr (crossing the Rs. 100 cr mark for the first time, up 14% Y-o-Y, up 9% Q-o-Q), EBITDA of Rs. 33 Cr (up 29% Y-o-Y, down 8% Q-o-Q). PAT stood at Rs. 19cr (up 31% Y-o-Y, down 8% Q-o-Q).

In Q3FY19, OCCL reported std. rev. of Rs. 96 Cr (up 10% Y-o-Y, down 4% Q-o-Q; against our estimate of Rs 92 Cr), EBITDA of Rs. 36 Cr (up 32% Y-o-Y, up 14% Q-o- Q) with EBITDA margin of 37.6% (up 625 bps on Q-o-Q basis).

ICICI Securities Ltd | Retail Equity Research Oriental Carbon & Chemicals (OCCL) reported a robust operational performance in Q3FY19 led by volume growth in its base business (insoluble sulphur) and operating leverage benefits arising out of brownfield nature of capacity expansion (11,000 tonne- two phases) Net sales in Q3FY19 came in at | 94.5 crore, up 9.6%YoY. EBITDA in Q3FY19 was at | 34.5 crore with corresponding EBITDA margins at 36.5%. Reported margins look unusually high as it includes forex...

In Q2FY19, Oriental Carbon & Chemicals Ltd (OCCL) reported revenues of Rs. 100 Cr (up 31% Y-o-Y, up 7% Q-o-Q; against our estimate of Rs 90 Cr), EBITDA of Rs. 32 Cr (up 32% Y-o-Y, up 10% Q-o-Q) with EBITDA margin of 31.5% (up 110 bps on Q-o-Q basis).

We maintain our positive stance on Oriental Carbon & Chemicals (OCCL) and retain Buy with a revised TP of Rs1575. Q2 performance was strong with EBITDA/PAT growth of 32%/42% YoY. We continue to remain positive on company's prospects led by solid demand outlook for IS in domestic market led by fast paced growth of domestic tyre manufacturers and opportunity for gaining market share globally led by higher penetration in new geographies of US & China. Consolidated margins are expected to improve over FY18-20E led by i) higher share of IS business with increasing volumes coupled with benefits of operating leverage and...

ICICI Securities Ltd | Retail Equity Research Oriental Carbon & Chemicals (OCCL) reported a steady Q4FY18 performance. Net sales for the quarter came in at | 89.8 crore, up 9.4% YoY. EBITDA in Q4FY18 was at | 24.1 crore with corresponding EBITDA margins at 26.9% (down 340 bps YoY) EBITDA margins in Q4FY18 came in muted primarily tracking MTM...

ICICI Securities Ltd | Retail Equity Research Oriental Carbon & Chemicals' (OCCL) performance in Q2FY18 was a tad below our expectations primarily driven by slower sales volume offtake and appreciation of the rupee. OCCL reported net sales of | 152.2 crore in H1FY18, up 4.9% YoY, solely driven by volumes Operational efficiencies have begun to kick in on the expanded production base with H1FY18 EBITDA coming in healthy at | 48.0 crore (up 11.1% YoY) with corresponding EBITDA margins at 31.5%,...

Volume growth subdued as ramp-up remains slow & steady: Revenue rose 7.3% YoY but was down 3.5% QoQ to Rs747mn. Revenue increase YoY was largely driven by volumes but the ramp-up of Mundra line was lower than our expectations as management pointed out that minor hiccups in ramp-ups were encountered. Realisations were largely flat on US$ basis but unfavourable...

Decent Performance despite Low Realisation: The company has witnessed modest growth of 3.1% to Rs. 812 Mn in Q1FY18 from Rs. 788 Mn in Q1FY17 on YoY basis due to lower sales realization in value terms on account of depreciationof USD against INR during the period. EBITDA for Q1FY18 came at Rs. 255 Mn up from Rs. 222 Mn as against Q1FY17, marking YoY growth of 14.9%.

ICICI Securities Ltd | Retail Equity Research Oriental Carbon & Chemicals (OCCL) is a speciality chemical company manufacturing insoluble sulphur, a key raw material used in vulcanisation of rubber while manufacturing tyres (automobile) The company has a prominent market share in the domestic market (in excess of 50%) whereas its global market share was at ~10% OCCL has a capital efficient business model and has been clocking healthy 25%+ EBITDA margins on a consistent basis (FY10-17). The...

ICICI Securities Ltd | Retail Equity Research Oriental Carbon & Chemicals (OCCL) reported a robust Q4FY17 performance with net sales coming in at | 82.1 crore, up 18.4% YoY, largely tracking healthy volume growth (insoluble sulphur) EBITDA for the quarter came in at | 24.8 crore (up 29.8% YoY) with corresponding EBITDA margins at 30.3%. However, PAT in Q4FY17 was at | 9.3 crore on account of higher tax incidence (creation of deferred tax liability due to commissioning of new capacity)...

ICICI Securities Ltd | Retail Equity Research Oriental Carbon & Chemicals (OCCL) is a speciality chemical company manufacturing insoluble sulphur, a key raw material used in vulcanisation of rubber while manufacturing tyres It is the only Indian company manufacturing this quite essential product and is among the top three in oligopolistic market globally The topline growth at OCCL was muted over FY15-17E largely due to capacity constraints with the company operating at 90%+ utilisation...