Buy PCBL, target price Rs 524: HDFC Securities

HDFC Securities has buy call on PCBL Ltd. with a a base case fair value of Rs 524 and a bull case fair value of Rs 559 over the next 2-3 quarters.. The current market price of PCBL Ltd. is Rs 469.5. PCBL., incorporated in 1960, is a Small Cap company with a market cap of Rs 17844.54 Crore) operating in the Tyres sector.

PCBL Ltd. key Products/Revenue Segments include Carbon Black, Power, Export Incentives and Scrap for the year ending 31-Mar-2024.

Financials

For the quarter ended 30-09-2024, the company has reported a Consolidated Total Income of Rs 2168.85 crore, up .67 % from last quarter Total Income of Rs 2154.44 crore and up 45.62 % from last year same quarter Total Income of Rs 1489.39 crore. The company has reported net profit after tax of Rs 123.45 Crore in latest quarter.

Investment Rationale
Increase in coal tar prices and limited expansion will help PCBL to further increase its presence in the export markets. Management thrust on the export volumes, increase in the share of high margin specialty grade carbon black portfolio will assist the company in improving the operating margins and diversify the revenue streams. Expansion in the newly acquired Aquapharm and ramp up of niche battery chemical segment provides visibility for the revenue growth as well as profitability which is expected to clock a significant growth of 4x-5x in the next 5 years from the current levels of Rs 500 crore in FY24. HDFC Securities expects revenue/EBITDA/PAT to increase at a CAGR of 19.3%/22.4%/19.6% over FY24 to FY27E. The brokerage believes investors can buy the stock in Rs 457-469 band (22x FY27E EPS) and add on dips in Rs 436-444 band (20.5x FY27E EPS) band for a base case fair value of Rs 524 (24.5xFY27E EPS) and bull case fair value of Rs 559 (26.25x FY27E EPS) over the next 2-3 quarter.