Oriental Carbon and Chemicals Ltd

HDFC MF buys 1.85 Lac shares@ 685, has been recommended by Daljit Kohli at India Nivesh. He is a pretty good and conservative analyst. Chemical share are in favor now and this one can be considered below 650. Share has been steadily increasing in EPS and is 40% discount to Industry PE (though i am never conformable with Industry PE as a BM)

Disc: Invested at 650 and plan to add.

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OCCL would reward investors handsomely if you have patience to wait for 4-5 years. Radialisation will be a game changer
for the company. Any disruption will not effect this company as Tyres are needed for any vehicle. It doesnt have a severe competition in India and Oligopoly companies have done well in India.

Disc: Invested at 450 and may be biased.

Agree - its a big position for me. I heard that they are trying for a break through in the US market and if done, it will help improve cap util and realizations in its new capacity. improvements in volumes in domestic market, pick up in luxury buses and high end CVs (given improvement in roads) will help improve its performance in domestic market. its a low volatility, decent div yield stock - i only wish the growth in topline was a little faster though. the fly in the ointment is the demand situation in europe - which is quite lukewarm at the moment although for such a small player, market growth is not necessarily a driving force - its more about taking market share away from existing players.

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what do you think of valuations at cmp? I am also invested in this and planning to add more but some how every time I think, the stock price goes up. Even on muhurt trading session, I thought but couldn’t do. What do you make of valuations

Chintri, One thing i have learnt which is most common but very hard to accomplish, is to buy cheap. OCCL valuations are bit high and please buy on any corrections. If Trump wins US elections , then Market will fall and that could be an opportunity.

occl q2.pdf (2.5 MB)

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OCCL Q2 results are as expected and nothing great. I am not really happy with Interim dividend, instead they could have used it to reduce the debt.

Didn’t you notice the big positive news? Co has completed the expansion 3 months ahead of schedule and will be shipping its product to the biggest market US which was so far the monopoly of Eastman Chemicals?

US customers are eagerly awaiting the advent of a quality competitor. It nicely increases the opp size and co execution is happening.

discl-invested since 2014 n 2015.no activities in last 3 months

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one more coverage of Occl n Premco Global,

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OCCL_Investor_Presentation_Q2FY17.pdf (1.4 MB)

In the presentation it says the capex till 2018 will be funded by a debt to equity of 2:1
Will that be a cause for concern?

Not really sure how much it can hurt.

recent research report published by centrum broking which is available on moneycontrol.com under the stock oriental carbon and chemicals shows that this occl and Omkar are competeters. How’s this possible? Any view?

Discolure : invested in both Omkar speciality and occl

Both are into specialty chemicals.Probably thats why they were mentioned as competitors.
Dont think they have any common products though

OCCL and Omkar are totally different animals. One is selling chemical to tire companies and other sells APIs and intermediates to mostly Pharma companies. OCCL has (mostly) single product while Omkar has 100+ products.
OCCL does have structural advantage in market dominated by three companies where Eastman is price setter and dominant market leader (75%). OCCL enjoys the price set by Eastman. Very few companies can have such structural advantage in global market. The tire companies won’t let OCCL die. They need alternative supplier to Eastman.

discl: Hold both OCCL and Omkar

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OCCL starts commercial production much ahead of schedule - http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/642CD959_8E93_4E79_A3A8_F1D80BDAC23A_154351.pdf

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Q3 FY 17 concall notes

  1. Global demand for IS rising at 2-4 percent CAGR. hence incremental demand to be about 60000 MTPA by 2022.
  2. The three companies( Eastman, Shikoku , OCCL) are putting up their capacities in line with the incremental demand. Hence dont see any price wars or over capacity building up in the future. We are not snatching any market share from our competitors, neither we need to fear the big guy Eastman Chemicals as it already has 70 percent MS in the world.
  3. Exports form 70 percent of sales, will go up as our new capacity will cater to foreign demand. Will be penetrating China, North America.
  4. Domestic demand of IS is increasing at a double digit rate, we capture 50-60 percent Market Share here , rest is Eastman Chemicals.
  5. Inspite of greater growth rate of demand in India than global we are increasing our exports since we want to expand in new geographies.
  6. Phase 1 of the project commenced production since Dec 20 , 2016. Phase 2 will commence production from Q 2 FY19. By the end of this calendar year we see the full run rate of sales of phase 1.
  7. Performance this quarter was as expected , not much impact of demonetization as 70 percent exports.
  8. We plan to enter into new line of business for diversification post expansion.
    Much details on this have not been decided. This will be interesting to watch . It looks like as per the estimated incremental demand and the capacities being put up by all the three players there wont be much scope left for growth in IS business post expansion . Hence they will be looking to get into a new line of business.(my personal view)
  9. Finance cost to be around 1.5 cr quartely,from next quarter onwards as they were being capitalized till now for phase 1.
  10. phase 2 capex of 60 cr will be incurred in FY18.
  11. when asked about Eastman making technological changes and trying to lower its cost , they said they are also doing the same and continously working on upgrading technology.
  12. can pass on increase in cost of RM to product prices.
  13. Their subsidiary scharder duncan to turn profittable this year.
    Thanks

Disc - Invested

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Promoter has sold 100K shares
http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/F751B134_1C31_4BDC_A12C_02AFD4A6E6B9_170426.pdf

It is just one promoter and total shareholding is down from 51.04% to 50.07%.

It will be interesting to watch if there is any wider pattern to this selling or just one off.

@abhimakk it will be interesting to see who has bought it as normally these kinds of volume dont happen in the counter