3x return in just over a year! This stock still looks good

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A smallcap company that manufactures carbon black, used by the rubber industry, got several buy calls from stocks brokers after its posted steady performance in the March quarter amid inexpensive valuation.

Phillips Carbon Black has been buzzing on Dalal Street due to its manifold return since March 2020 lows. Shares of the company have gained 267%, or 3.66 times, to Rs 202.20 on April 26 from Rs 55.10 on March 24 last year. On the other hand, the benchmark BSE Sensex gained 81% to 48,386 during the same period.

Of late, the company posted nearly 76% year-on-year growth in consolidated net profit at Rs 127.38 crore for the quarter ended March 31. On the other hand, revenue was up 23.7% at Rs 866.73 crore.

Brokerage ICICI Securities has set a target of Rs 260 for Phillips Capital post Q4 results. “We believe the auto sector is well poised for growth, subject to intermittent Covid induced hiccups, with demand seen bouncing back sharply (double-digit volume growth) across segments in FY22E. Given the low penetration of 4-wheelers domestically and infrastructure segment led demand creation in the commercial vehicles space, we have seen structural legs to this demand recovery.

“We maintain our positive stance on Phillips Carbon amid its capital-efficient business model (RoE, RoCE of over 16%), robust cash flow generation and overall positive demand scenario both domestically as well as globally,” the brokerage said.

On the other hand, IDBI Capital said: “Philip Carbon Black reported better than expected Q4FY21 profitability mainly led by higher than expected specialty volumes. Replacement demand for tyres has picked up since Q2FY21. This, alongside improved demand from exports, resulted in a sharp recovery in H2FY21 volumes for Phillips. Looking ahead, we expect its margins to be supported by the rising share of specialty volumes,” It has a buy call on Phillips Carbon Black with a price target of Rs 267.