Equity Analyst, LightStream Research

Chacko Jacob

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Bottom-Up

<p><a href="https://www.smartkarma.com/entities/5777" target="_blank" data-smartkarma-citation="entities:5777:1">Phillips Carbon Black Ltd (PHCB IN)</a> is India's largest manufacturer of carbon black, a key raw material in tyre manufacturing. After enduring two tumultuous years in 2014 and 2015 that saw the company post losses, it made a recovery in FY2017 as earnings bounced back to pre-2014 levels. The current fiscal period is turning out to be another successful year for the company as it has already surpassed its FY2017 earnings in 1HFY2018. The factors that are likely to propel it forward in the coming periods include: </p><ul class=""><li>Brownfield expansion of its production capacity to meet the growing needs of domestic and global tyre manufacturers.</li><li>Increasing the share of high-margin non-rubber carbon black in its product mix. </li></ul><p>The expectations on the company are reflected in its stock price that has surged 5.4x in the last one year. While the company has performed well during this period, a recent 50% surge in stock price over just 6 days (Jan 2nd - Jan 8th) has forced us to reconsider our original opinion of the company being undervalued. Though the stock price has declined 11% in the last two days, it still remains 13% above our TP of INR 1160. </p>

Phillips Carbon Black Ltd (PHCB IN) is India's largest manufacturer of carbon black, a key raw material in tyre manufacturing. After enduring two tumultuous years in 2014 and 2015 that saw the company post losses, it made a recovery in FY2017 as earnings bounced back to pre-2014 levels. The current fiscal period is turning out to be another successful year for the company as it has already surpassed its FY2017 earnings in 1HFY2018. The factors that are likely to propel it forward in the coming periods include: Brownfield expansion of its production capacity to meet the growing needs of domestic and global tyre manufacturers.Increasing the share of high-margin non-rubber carbon black in its product mix. The expectations on the company are reflected in its stock price that has surged 5.4x in the last one year. While the company has performed well during this period, a recent 50% surge in stock price over just 6 days (Jan 2nd - Jan 8th) has forced us to reconsider our original opinion of the company being undervalued. Though the stock price has declined 11% in the last two days, it still remains 13% above our TP of INR 1160. 

Phillips Carbon Black: Recent Stock Surge Shadows Potential Earnings Growth Aided by Product Mix