Buy Phillips Carbon; target of Rs 134: Angel

Angel Broking has recommended a buy rating on the Phillips Carbon Black with a target price of Rs 134 in its October 29, 2008 report. “India’s economic growth is expected to slow down in FY2009 to 8% as the RBI keeps a tight Monetary Policy and the government initiates a slew of measures to rein in inflation ahead of Parliamentary elections next year. Interest rates have also spiked substantially, which would impact the Interest rate-sensitive sectors including the Auto sector. Invariably, the Tyre industry would also get affected. But, around 60% of the Tyre demand is from the Replacement segment, which cushions companies like PCBL which are directly dependent on the Tyre industry growth rate.”

“There would continue to be huge demand from the Tyre Replacement segment due to the huge vehicle population getting added over the years, and because of PCBL’s market leadership position it would stand to benefit. We expect PCBL to record CAGR of 21.2% in Top-line over FY2008-10, while Bottom-line would grow at a CAGR of 3.1% in the mentioned period. At the CMP, the stock is trading at 2.2x FY2009E and 1.7x FY2010E Earnings and 3.4x FY2010E EV/EBITDA. We maintain a Buy on the stock, with a revised Target Price of Rs134 (Rs219). We revise the Target P/E multiple downwards to 4x FY2010E in line with the valuation contraction in broader indices,” says Angel's research report.

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Source: Moneycontrol