Phillips Carbon Black - Q4FY20 First Cut - ICICI Securities

(CMP: Rs. 100 MCap: Rs. 1,740 crore)

Phillips Carbon Black reported steady performance in Q4FY20. Topline decline of 24% is a mix of volume and realisations decline with double digit volume decline in tandem with muted volume numbers at tyre players domestically. Margins remained resilient at 14.2% with strong CFO as well as FCF generation.

Q4FY20 Earnings Summary

- Net sales for the quarter stood at Rs. 700 crore, down 24% YoY. Carbon black sales stood at Rs. 680 crore, down 24% YoY while Power segment sales stood at Rs. 39 crore, down 7% YoY

- EBITDA in Q4FY20 stood at Rs. 99 crore with corresponding EBITDA margins at 14.2%, down 140 bps QoQ. Decline in margins was led by negative operating leverage amidst 150 bps expansion in gross margins

- PAT for the quarter came in at Rs. 72 crore, almost flat YoY and QoQ, supported by negative tax rate for the quarter

- On the B/S side, deleveraging continued with gross debt down from Rs. 796 crore in FY19 to Rs. 719 crore in FY20, down ~Rs. 75 crore YoY. On the cash flow front, CFO for the year came in strong at ~Rs. 550 crore led by improved net working capital cycle (down 13 days to 43 days) with FCF for the year at ~Rs. 200 crore (>10% FCF yield). Interim dividend of Rs. 7/share is being stated at final dividend

With full year EPS of Rs. 16.5 for FY20, the stock trades at inexpensive valuations of 6x P/E and 5x EV/EBITDA with stable ~15% return ratios profile. Near term demand environment is seen as challenging given the overall slowdown in the domestic as well as global automobile space and surplus capacities in the system. We would be coming out with a detailed report post interaction with the management.

Shares of PHILLIPS CARBON BLACK LTD. was last trading in BSE at Rs.96 as compared to the previous close of Rs. 100.7. The total number of shares traded during the day was 221427 in over 3389 trades.

The stock hit an intraday high of Rs. 103.7 and intraday low of 95.5. The net turnover during the day was Rs. 21932725.

Source : Equity Bulls

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