News from Notch Consulting, Inc.

August 16, 2010

Buy Phillips Carbon Black: Choksey Securities

Filed under: Carbon Black — Notch @ 11:18 am

From the Economic Times, Deven Choksey, MD, an analyst with KR Choksey Securities, discusses his buy recommendation on Phillips Carbon Black.

For Phillips Carbon Black, the first comfort factor that we have in this company is that this is a company where you have got a huge amount of marginal safety.

It is just available at around 4 times odd to its future price earning multiple and having a carbon black capacity of about 3,60,000 tonnes and they are expanding it by about 1,15,000 tonnes additional and along with that, they have got about 60 megawatts power, which they are expanding by another 88 megawatts.

Now the power like in sugar industry is a by-product for them but if you look at the bottom line contribution in the last year, the power ended up contributing about more than 60% to the bottom line because the entire gas that is getting generated from the carbon black business is a feed stop for the production of power which is just about 60 paisa per unit cost vis-à-vis that they end up selling at about Rs 5 per unit kind of a thing out of which whatever they produce, 30% is captive and 70% is merchant sell.

All put together, this company is now moving probably into higher space with 157 to 160 crore profit in the current financial year and next year about 200 crore plus profit. So we find it much comfortable.

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