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.