Phillips Carbon Black – A Phenomenal Growth Story

In June 2016 when we invested in Phillips Carbon Black, we wondered if it was the right call. The stock was priced high at Rs. 158 levels but since it was our research recommendation, we would follow the system. The RPG group was getting bad press due to news of issues within the group. However, we also knew of their achievements, one of them being HMV (His Master’s Voice, now SAREGAMA).

Today, it is 18 months past the investment date and the stock has reached Rs. 1500 plus levels, giving us a 900% return on our investment. We have added to our position at various levels, even after their September ‘17 results when the price was above Rs. 1100. At today’s price, even the last addition has made about 35% gains.

Company Outlook

The company is in the business of manufacturing carbon black- an input raw material for tyre companies, along with other rubber products and plastics. Seeing as auto sales have increased at double digit rates since 2012, it is only natural that demand for the raw material goes up too. Any automobile needs a tyre replacement after 3 to 4 years of usage. As the auto industry continues to grow, the demand for carbon black has multiplied due to OEM usage and replacement market for tyres. PCBL is one of the major producers of carbon black in India and holds a large share of the market. There are only two listed companies manufacturing carbon black, with the other being HEG.

The company turned around in 2015 and is now staying on top by leveraging all potential opportunities and also investing in capacity expansion. Demand for the company’s products is expected to grow in the long term, which will be beneficial to the company’s stock price in the coming quarters.

BTT REVIEW

Today, our investments in speciality chemicals with PCBL, HEG and Graphite India contribute to our ability to outperform the market. In the first six days of trading in 2018, our portfolio has managed a 7.15% growth against the SENSEX which grew only 0.88%. A near-ten-times higher growth than the benchmark index thanks to our strong portfolio of holdings.

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