We discussed Oriental Carbon & Chemicals Ltd. (OCCL) almost a year back. The stock has remained at the same levels while the company has grown and the fundamentals have got even better. To get a more understanding on the company and the future prospects, we met with the senior management of the company. Here are the extracts from the management meet:
Insoluble Sulphur is a niche market and as per our data total market is about 2,25,000 MT. Solutia controls 70-75% of the market. OCCL is the second largest with 7-8% market share.
Insoluble Sulpher is mostly used by the Tyre Industry. Increased Radialisation is the main demand driver.
Entry Barriers: The technology is closely guarded. No tyre major is interested in shifting vendors or entertaining new vendors unless you can supply in sizeable quantity and the approval process is lengthy and costly.
Continental AG, Goodyear, Bridgestone, Pirelli are some of our big customers. In the domestic market we have MRF, Apollo, JK tyres and some more.
Demand situation warranted that we expand quickly. Yes capacities were pre-sold as per arrangements with our customers. We are working at something like 75% capacity utilisation at the moment.
We should continue to grow at current levels. The volume growth may be limited to 10-15% if the demand slack continues.
Effective tax rate will be lower at 20-22%.
If you see the last 5 years, we have generally been increasing dividends. In FY12 again we have increased dividends.
Yes 500 Cr is possible and should happen after the expansion of the next 11000 MT capacity.
Please check out the complete management interview (requires free login)
Continue reading Oriental Carbon & Chemicals: Management meet
FY 2012 results are now out and the focus will shift towards earnings for FY13. Despite a very challenging market and weak economic conditions, we are happy with the financial results of the companies we track. Most of them have been able to report healthy growth and maintain their leaderships. Many of the companies have raised dividends and are now trading at very low PE (price to earning) and Price to Book (P/B) ratios. Although the macro environment and prospects remain uncertain, there is an opportunity for stock pickers to do their home work and build a quality portfolio.
Some of the noticeable results of the companies we track are: Continue reading Updates for Financial Results 2012
Q3 results have been generally good and most of our stock ideas have posted good performance. Here is a brief evaluation of their performance:
1. Balkrishna Ind: The company has yet again posted an excellent set of numbers and has surpassed the expectations. It is fantastic for a company with as large a turnover of about 2500 Crores to grow at 30%+ per annum. The company is in process of a greenfield expansion which should double their capacity in 2 years and hence the company has potential to keep growing at 30% p.a. for next 2-3 years. They are targeting 10% market share worldwide by 2014.
The stock has been a major outperformer in this market. Yet the stock is trading at just less than 10 times earnings. I do expect it to get further re-rated upwards with bigger investors coming in.
*All Financial figures are in crore rupees (except EPS).
2. Astral Polytechnik: This is another GEM of a company. The company has delivered a growth of 60%+, much more than the expectations. This quarter results were expected to be bad because of the abnormal forex movement over last few months (company imports majority of raw materials and the Indian rupee has fallen from about Rs.44 levels to Rs.54 against the dollar in a span of few months). But the rupee has now recovered to Rs.49 levels and as the company has also done some price hikes in last few months, we may see some fantastic numbers in upcoming results.
*All Financial figures are in crore rupees (except EPS).
Continue reading Quarterly Results Update (Q3 FY12)
Dad spotted OCCL (Oriental Carbon & Chemical) early – a couple of years back but all this time, I was not sure of sustainability of good profits. Over last 5 years, Net Profit of OCCL has grown @ CAGR of 74%. I used to think that this might be cyclical like other chemical companies but it does not seems so.
OCCL’s core business is manufacturing of Insoluble Sulphur, a vulcanizing agent used in the Rubber Industry. It is an important raw material for tyre manufacturing. Manufacturing of insoluble sulphur is limited to only a few companies globally due to restricted access to technology. OCCL is the only Indian company into manufacturing of Insoluble Sulphur. Company is now a preferred supplier, exporting about 70% of its production to leading tyre companies.
Earlier, the company was exposed to huge volatility in prices of its raw material – Sulphur. But now the company is better placed to protect its margins by adopting quarterly pricing.
- Company undertook an expansion to double its capacity by 11,000 MT at SEZ Mundra. Phase 1 – 5500 MT, of the expansion has been commissioned during Aug, 11 and the second phase should get completed by end of this year.
- Production from this phase is already sold out.
- The land acquired at Mundra SEZ is sufficient for putting up another plant of 11,000 MT capacity.
Continue reading Oriental Carbon & Chemical Ltd
It is important to re-evaluate the portfolio and weed out non-performers, or the stocks in which the story is not developing as expected, or switch to new ideas which look cheaper or have more value than others. We have exited from couple of our ideas over last few days:
1. Jocil – Initially discussed @ 265, it is a good company with good fundamentals. The company has also rewarded with a bonus in the ratio of 1:1 and the stock is cum-bonus @ 285. Yet, we are switching out as we feel better ideas are available. Also a couple of negatives are – 1.) The company hasn’t been growing over last few quarters while the debt has increased. 2.) Company is import dependent and due to strong rupee weakness, they may get a hit.
2. Balaji Amines – Initially discussed @ 48, though the stock seems cheap at 4 times PE multiple @ 35, but the negatives are – 1.) The debt levels are too high to be comfortable with. 2.) Being in chemical sector, stock usually get low PE ratios due to lumpy earnings. At this time, there are several companies which are debt free, domestic business and showing growth, yet available at 4-6 times earnings. Eg: Indag Rubber, IFB Agro etc.
Some new ideas which we are studying and look good are – AMD Industries, Oriental Carbon & Chemicals and GIPCL. Continue reading Portfolio shuffling…