PCBL: This multibagger stock surged 17% after Q3 earnings this week; is it a good time to buy?

In CY23, the company’s shares witnessed a notable gain of 94%, attributed to the robust performance of the core carbon black business and the strategic entry into the high-growth specialty chemical sector.

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In the previous trading session, the stock achieved a new record high of ₹317.95 apiece and it concluded the week with a remarkable rally of 17%, marking its best weekly performance since October 2023. This uptrend came after investors were impressed with the company’s Q3 FY24 earnings.

The company on Monday (January 15) posted a consolidated net profit of ₹148 crore, an improvement of 52% YoY and 20% on a QoQ basis, driven by an improvement in per-kg profitability.

It reported consolidated revenue from operations of ₹1,657 crore, up 21.60% YoY and 11% QoQ, led by a rise in volumes of 33% YoY and 5% QoQ. Sequentially, realisations jumped by 7%.

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Blended gross spreads grew by 16% YoY & 7% QoQ to ₹36.2 per kg, the highest-ever gross spread reported by the company over the last 18 quarters. In addition, supply tightness in the CB space globally helped PCBL improve its export volumes, which jumped by 98% YoY & 21% QoQ.

The long-term outlook is bullish as PCBL is a proxy play on volume recovery in the tyre sector, which is set to grow at 6-8% from FY23–26E. The company will witness a volume CAGR of 13.5% from FY23–26E, said domestic brokerage firm SMIFS Limited.

Is the stock still a ‘buy’ after a sharp run-up?

Despite the sharp run-up in shares over the last few years, domestic brokerage firms still expect the stock to continue its bull run as they anticipate the company’s core business of carbon black is on a strong footing, given the favourable dynamics of the global CB market.

Following the company’s December quarter performance, JM Financial maintained its ‘buy’ rating on the stock and revised target price higher to ₹355 apiece from an earlier price of ₹330 apiece.

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Factoring in 3QFY24 results, the brokerage raised its volume estimates along with per-kg EBITDA. As a result, the brokerage’s FY24/25/26 EBITDA estimates are revised upwards by 9%, 9%, and 7%, and the EPS estimates are revised upwards by 11%, 11%, and 9%. It expects PCBL to register a 12% EPS CAGR over FY24E–26E.

Along similar lines, Nuvama Institutional Equites also retained its ‘buy’ rating on the stock and raised its target price to ₹323 apiece from an earlier price target of ₹279 apiece. While SMIFS has an ‘accumulate’ rating on the stock with a target price of ₹314 apiece.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before making any investment decisions.

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Published: 19 Jan 2024, 07:30 PM IST