Oriental Carbon and Chemicals Ltd


(Ayush Mittal) #225

Hi Sunil,

I think your calculation for ROCE on the expansion is incorrect as you have not considered profit before interest expense while in denominator you have considered the total capex (which includes debt + equity). So if you will do the necessary adjustments the ROCE will easily be above 20%.

While the more important thing to consider should be as to how many variables will remain constant as the result of expansion is a bit away.

Regards,
Ayush
Disc: Invested


(sachit) #226

Hey guys,
would anyone know why OCCL does not sell forward cover in advance (like balakrishna industries does and most IT companies do)? Ideally, wouldn’t it help the company earn a tidy premium each year in the form of forex earnings?


(Rajat Setiya) #227

Hi Sunil,

In FY15 annual report volume growth in domestic and export market is mentioned form there you can make out total volume growth for Fy15.

pasting a table for your reference:

Thanks
Rajat


(Rajat Setiya) #228

Our understanding is also similar that Chinese production gets consumed mainly in their country. Additionally, as per OCCL’s management, Sinorchem, a chinese player, shelved their plans to expand capacity.


(Rajat Setiya) #229

guys,

While calculating ROCE, we will also have to take working capital required in generating that incremental sales of ~150Cr.

I did ROCE calculation using some assumptions as mentioned below, please correct if i’m wrong.

If we take realizations of ~142K (in Fy13 realizations were at 123K, i have assumed an increase of 5% pa; let me know if you have a true number), EBIT margins of 25% and working capital of 100 days, ROCE comes at 20%.

Best
Rajat
Disc: invested


(hazariwalapu) #230

Do anyone know what is a percentage of cost of Insoluble sulpher in the production of tyre?

Prashant


(Varadharajan Ragunathan) #231

About 1-2 % is the cost of insoluble sulphur in the overall cost of a tyre but its a critical ingredient that prevents deformation and abilityt o take heat at high speeds


(hazariwalapu) #232

Thanks for your reply. As per tyre companies reporting, they are not reporting separately but they are reporting Chemicals in the raw material cost segment. i think this insoluble sulpher is a part of this chemical cost. Now if you see this chemical cost is almost varies between 9-12% of their total raw material cost and it is about 5-7% of topline.

Pl.correct me if i am wrong.

thanks

Prashant


(magnet) #233

http://www.indianivesh.in/Downloads/636022759990000000_Oriental_Carbon_Chemicals_Ltd_Initiating_Coverage_20062016.pdf

Research report by brokerage house.

importance should be given to understand the business from the pdf in gist.


(Sunil) #234

Few points which I was not able to locate in annual report

  • No mention of current capacity and the size of new capacity which is being added.
  • No mention of the amount of insoluble sulfur sold in terms of MT, so cannot calculate realization per MT.

In earlier annual reports they used to mention both above points.

No major takeaways/ changes found from annual report. Few minor points

  • sales realization decreased being mentioned at many places.
  • company seems to have made process improvements in reducing the power usage and packaging costs keeping sales volume almost same.
  • Sluggish growth in international demand. Domestic demand decent.
  • Akshat Goenka (28Yrs) elevated to Joint managing director.
  • New capacities are being setup in India by Bridgestone, Michelin and Yokohama can increase demand.

(jirohit) #235

hi Sunil,

  • they dont mention volume because of competitive reason. have been saying the same in recent con-calls
  • their investor presentation given details of expansion. currently 23,000, adding 5,500 in 2017 and another 5,500 in 2018, taking capacity to 34,000 by 2018

additional point from annual report:

  • indicate progress in america and china and expect capacity utilisation in 2016-17 and also expect new capacity to be absorbed in these mkts
  • india being a growing mkt and increasing radialisation, expect double digit growth to continue.

(vaibhav) #236

Coverage on cnbc-tv18 today -


(Vikrant Yadav) #237

OCCL coverage:


(kris2727) #238

Hi, If Topline cannot grow until capacity expansion happens, stock price should consolidate but instead stock is going up continously. Anything cooking?


(hemtan100) #239

Markets love certainty and here’s a company that’s reconfirmed during q1fy17 call about addition of new capacity to the tune of 25% by Q1 FY18. And being the no.3 in an oligopolistic business, valuation re-rating from 10x fy18 multiples can easily happen.


(aashish2137) #240

AR 2007-08 as requested by @kmadiga

755-08.pdf (2.2 MB)


(Adiga) #241

Thank you very much @aashish2137


(shunz) #242

There are certain aspects which hold me back from investing in this company.

Take a look at AR 2015. Following points are kind of red flags for me

  1. The JMD and MD will be paid 50% of their commission for meeting financial “forecasts” (Page 13-14) - I think more often than not, such terms and conditions lead to an increased probability of cooking up the statements for cashing those bonuses.

  2. The independent directors are getting a lot of commission ,apart from the sitting fee (page 32)- I think this is unfavourable to the independence of independent directors. Independent directors should get minimal to zero remuneration (apart from sitting fees).

Would like to have the opinion of others on this.


(Ayush Mittal) #243

This would have been relevant for a professionally managed company growing at a fast pace. Here the problem has been of slow growth :wink: Also, if you carefully look at the numbers, the company is reporting healthy cash flows and the same has been used to repay loans. The company has also been paying taxes and dividends and hence I don’t feel there is anything wrong in numbers.

Regards,
Ayush


(aashish2137) #245

Annual reports from 2003-04 till 2010-11 as requested by @Krishna26

755-XX = Oriental Carbon-last two digits of the year end (11 is FY 2010-11)

755-11.pdf (417.4 KB)
755-08.pdf (2.2 MB)
755-04.pdf (1.6 MB)
755-10.pdf (2.4 MB)
755-07.pdf (2.0 MB)
755-06.pdf (2.4 MB)
755-09.pdf (2.5 MB)
755-05.pdf (2.8 MB)