Ashish Kacholia Portfolio Stock: ICICI Securities is bullish for 37% upside

With a market valuation of Rs. 4,365.36 crore, PCBL Ltd. is a chemical-related small-cap company. The largest producer of carbon black in India, PCBL is a major player internationally with a sizable clientele in more than 45 nations. The brokerage firm ICICI Securities is bullish on the Ashish Kacholia portfolio stock PCBL Ltd. and has set a target price of 160, which would be a new high for the stock and imply a potential upside of 37% from the current market price of 116.50. This comes after the company recorded a 21 per cent growth in consolidated net profit and a 40 per cent growth in revenue in Q1FY23.

According to PCBL’s consolidated quarterly figures, the company’s net sales in June 2022 were 1,409.07 crore, up 40.37 per cent from 1,003.85 crore in June 2021. In June 2022, the firm recorded a quarterly net profit of Rs. 125.91 crore, an increase of 20.71 per cent over the previous quarter’s net profit of Rs. 104.31 crore. The company’s overall expenses increased by 43% YoY to 1260 crore from 877 crore in the same period last year. PCBL’s earnings per share (EPS) dropped from Rs. 6.05 in June 2021 to Rs. 3.34 in June 2022.

The brokerage company ICICI Securities has said in a note that “PCBL has been one of our early finds wherein it grew ~2x in the past five years (~ 60 in July 2017 to ~ 120 as of July 2022). We maintain our positive view and retain BUY rating on the stock. PCBL with organic growth prospects, much heathier B/S and return ratios is a good proxy to play upon recovery in volumes in the tyre and broader auto space. Revising our estimates (volume, margins), we value PCBL at unchanged target price of 160 i.e. 12x P/E on FY24E EPS.”

The key triggers for the stock’s potential upside according to ICICI Securities are healthy growth on anvil. The brokerage expects sales, PAT to grow at 25%, and 9% CAGR, respectively, in FY22-24E, building in ~8% volume CAGR in the same time. Sales growth looks optically higher due crude led rise in realisations, added the brokerage. With greenfield expansion (~150 KT) under execution and successful strides made in the speciality carbon black domain, long term growth prospects are robust amid limited competition in overseas markets, expected commissioning of Greenfield project in CY22E with brownfield expansion of speciality grade carbon black lines (~40,000 tonne) by FY24E and trades at inexpensive valuation of <10x P/E on FY24E EPS of ~ 13.4/share, said ICICI Securities.

Ashish Kacholia, an eminent investor, currently owns 50,04,990 shares, or a 1.33 per cent stake in PCBL, according to the company’s shareholding pattern for the quarter that ended in June.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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