Oriental Carbon and Chemicals Ltd


(us121) #289

phillips carbon i believe is another company. though i have not much knowledge on these companies/ matter.


(sanjay agarwal) #290

he was referring to nocil i guess…


(Vivek Gautam) #291

http://linkintime.co.in/website/gogreen/2017/AGM/OCCL/AR-2017.pdf

Some marquee names like Pabrai,Anil Goel,Seema Goel,Sangeetha s DSP BLACKROCK,P Subramanian,have entered n increased their holdings in OCCL besides HDFC ,L&T MF

any idea about NEETA MANOJ RUPAREL,SURESH BHATIA ,DEVABHAKTUNI KRISHNA
KUMARI other major shareholders?


(Ayush Mittal) #292

Good to read the FY 17 annual report of the company - the quality of the report is much better with useful insights on the industry and the company:

During the year the Company registered a growth of about 9% in Insoluble Sulphur Sales. The growth was achieved consequent to commissioning of the new line at Mundra SEZ in December 2016. The additional sales were mainly on account of increase in domestic demand and export mainly due to new geographies added. The sales volume growth was in double digit in both the markets. Average Sales Realisation was lower during the year due to reduction in Raw Material Prices. However, there was an improvement in margin over last year on account of better capacity utilization.

The first phase (5500MTPA) of Expansion of Insoluble Sulphur at Mundra, Gujarat was completed during the year and commercial production was started on 20th December, 2016.

Sulphuric Acid margin were better than the previous year resulting in better profitability. However sales were lower due to lower production on account of maintenance issues in the plant.

Future Prospects:
Growth in global tyre Industry, after a period of lull, has started picking up. Growth numbers are also expected to be healthy.

Other growth driver is the new compounds being designed for Ultra High Performance Tyres where requirement of Insoluble sulphur is on the higher side. This will add further to the growth of Insoluble sulphur, consumption globally. Our product is accepted and is suitable for such new age applications.

We have successfully opened up newer markets like China and USA. The response for the Company’s products has been good and there is sufficient head room for growth in those markets. These markets are expected to be our major growth drivers.

The Company has also been able to get approvals from couple of new Tyre customers. This along with new geographies apart from adding to the sales numbers will also help to mitigate risks.
The work on second phase of capacity expansion of Insoluble Sulphur at its Mundra Plant is under progress and expected to be commissioned on schedule in second quarter of 2018-19.

The name of the Subsidiary has been changed during the year as per agreed terms at the time of acquisition. One production line of this subsidiary producing tyre tube valves was closed during the year.

Good pointers on continuous R&D being pursued by the company. Recurring expense is 88 lac.

Major Shareholders:

HDFC Trustee has increased holding from 2.67% to 6.77%
L&T Mutual Fund holds 4.2%
Pabrai Investments .95%
Subramanian 1.18%
DSP Blackrock .79%
Mr. Anil Goel has reduced from 1.5% to 0.46% (major selling at 675)
Seema Goel has reduced from 0.8% to NIL (Sold at about 675)
Sangeetha S sold 1.15% (at about 700)

Management Discussion:

Global demand of Insoluble Sulphur is estimated to be 2,77,000 Mtpa as per Notch Report. Out of the above, about 77,000 Mtpa demand is in China and 37,000 Mtpa demand is in America. Out of the 77,000 Mtpa demand in China, about 50% is for the globally accepted quality of the product which is manufactured by three Companies in the world including your Company. Therefore, the demand for quality Insoluble Sulphur may be estimated at about 2,38,000 Mtpa. The current demand of Insoluble Sulphur in India is estimated at 16000 Mtpa. This is expected to continue to grow in double digits on the back of the following factors:

  1. Growth in radialisation of Commercial Vehicle tyres which is currently at about one third of the total demand of CV Tyres.
  2. India emerging as a hub for exports of tyres.
  3. New Capacities being set up in India for Tyre manufacturing by international players such as Bridgestone, Michelin and
    Yokohama as well as domestic players to cater to international market also.
  4. More Insoluble Sulphur is consumed in High performance tyres and new tyre technologies

The Insoluble Sulphur industry consists of three players who manufacture internationally acceptable Insoluble Sulphur including Your Company. One of the companies is a global Multinational having multi location plants. This player dominates the international Insoluble Sulphur Market. The other player and your Company are then similarly placed. However, Your Company’s Geographical footprint is wide and encompasses all continents. Other than above, there are a few Chinese manufacturers who are also in the business of Insoluble Sulphur, but they are yet to find global acceptance.

The 3rd line of Insoluble Sulphur (Phase I of expansion) at Mundra was successfully commissioned in December 2016 and work on the 4th line (Phase II of expansion) was started during the year.
The Company has made inroads in the American Markets and, therefore, is hopeful of operating the new addition in capacities at optimum level in the coming year. This should result in further optimization of input costs.

The production of tyres globally is shifting to more environmentally friendly tyres and lighter tyres. This will require consumption of more Insoluble Sulphur per tyre. Therefore, dosage of Insoluble Sulphur as a percentage of rubber is increasing.
Your Company’s efforts to enter North American and Chinese markets have also born fruit due to which The Company is confident of selling production from expansion

The Risk of competition from new manufacturers, mainly from China, is met through continuous product and process improvement to maintain quality and cost advantage over them and through collaborative efforts
with tyre companies to see that their requirements are met. Further, high technology barrier coupled with exhaustive approval processes of tyre manufacturers acts as a deterrent for entry of new manufacturers.

Regards,
Ayush
Disc: Invested


(Sunil) #295

In earlier annual reports they used to mention how much quantity in MT was insoluble sulfur was sold. It was helpful to calculate price per MT at which company is selling. They have stopped this in recent annual reports. Any idea how much quantity was sold?


(Arpit Jain) #296

Also, the promoters have sold some shares. Could this be important?

Disc: not invested


(kris2727) #297

Hi Ayush,

Where did you get 2017 Annual report from as i dont see in company website

Thanks
Krishna


(Uday) #298

Hi Kris

I got it via registered email with DP. Here is the link
http://linkintime.co.in/website/gogreen/2017/AGM/OCCL/AR-2017.pdf

Regards
Uday
Disc: Invested


(kv) #299

Pabrai also made this statement in his talk on shift - “electric cars use lighter tires”. Does anyone have any ground level data on this? I tried comparing weights of tesla tires vs bmw 5 series tires on tirerack.com and they were actually quite similar…


(Deepak Venkatesh) #300

Some reading around this I was doing plus some other previous experience.

In an ideal scenario what would an ideal electric car want? As per my understanding the lightest body, endless charge, just optimal coefficient of friction at the four points where the rubber touches the tarmac. Rest is either safety or comfort (both very important). This is within the constraints of a given electric motor(s) in the car. So yes a Tesla would prefer the lightest tyre having the properties of optimal grip. Actually the power (hp) generated at the engine/motor is different from the one which is actually measured for a car. The hp delivered depends a lot on the tyre and the surface it is on. So things like mileage (charge in case of EVs), longevity, hp and torque depend a lot on the properties of the tyre be it size, composition, treading, weight etc.

Even on Tesla’s website you have a selector for calculating the charge required and the only input for the tyre is the size of it (weather also to a certain extent). Then if we look at Michelin or Goodyear’s website the recommended tyre for a Tesla is a high performance consumer tyre which is no different for other internal combustion engine cars. So I don’t think any special tyres are made in the market especially for Tesla’s. This doesn’t mean that the future will be like this. Infact I am sure there will be special EV tyres which will come and they will certainly have higher insoluble sulphur. Perhaps its a matter of time now.

Infact the tyre recommeded for Tesla Model S by Michelin is Primacy 3 brand. In my first car a humble Hyundai Eon I upgraded the tyres to this! Yes they are good :wink:

Thanks & regards
DV

Disclosure: Tracking amount


(Sunil) #301

Do light tyres require more insoluble sulfur?


(Deepak Venkatesh) #302

Hi Sunil

I would twist the question slightly. Do higher performance tyres require more insoluble sulphur? The answer to this question will be yes.

For everyone you can read in great detail what goes into making a high performance tyre at this Tyre Compounding for Improved Performance.pdf (656.4 KB)

Tyres are either radial or non radial (basically bias type etc). I believe the non radial ones are cheap but they have many disadvantages. Refer to wikipedia for the advantages of radial tyre and also Michelin website. In the 80s all tyres sold in the US was radial in nature.

What would constitute a high performance tyre? The pdf attached describes very succinctly the characteristics of one. Essentially the traction (what energy from the engine is converted into actual movement as described in my last post), rolling friction, noise, durability are the factors.

Quoting verbatim from the document on insoluble sulphur “Sulphur, together with the activators and accelerators, reacts with the covalent bonds along the polymer backbones to form sulphur links. The number of sulphur atoms across each link and their density along the chains determine the final properties of the compound and in some critical components, the resistance to damage or ageing. Novel curing systems are being introduced (106, 163) which are claimed to control the crosslink length and thereby improve reversion resistance.

The Annual Report of OCCL also mentions this “More Insoluble Sulphur is consumed in High performance tyres and new tyre technologies.

No matter what vehicles run on the road they will still need tyres unless there is some technological breakthrough or commute/travel becomes independent of road travel. But do we see such a future?

Regards
DV


(amit) #303

ChinaSunsine is also ramping up insoluble sulfur production. Companies like NOCIL and China Sunsine who already provide most of chemicals should be able to take this area too .

What is advt OCCL has vs others is it R&D .


(Ayush Mittal) #304

Hi @amitverma21 - can you please share any article or data around the expected ramp-up by ChinaSunsine? As per OCCL’s annual report and other industry data - China manufacturers haven’t been successful in ramping up the production. The market continues to have just 3-4 players…perhaps its due to combination of technology entry barrier + very high capital requirement to put up capacity + long approval process + already matured and slow growing market.

Regards,
Ayush


(TT) #305

I have done a channel check ( alongwith a friend) with a few dealers in tyre industry and based on their inputs, the chinese players have occasional quality issues that makes the industry wary of sourcing from them. Quality issues in even one batch of insoluble sulphur affects a very large quantity of manufactured tires, so companies are typically not willing to take a chance. Take the info as you like, the dealers weren’t manufacturers themselves but know a fair bit about the industry.


(Rupinp) #306

China Sunshine’s annual report throws good light on their insoluble sulphur capacities and sales volume. Currently, they have a capacity of 20,000 tpa which is being increased to 30,000 tpa. Some excerpts from their Annual Report for Financial Year ended Dec 31, 2016:

Detailed annual reports can be accessed from: http://www.chinasunsine.com/index.php?option=com_content&task=view&id=29&Itemid=52

The OCCL annual report also mentions about the Chinese market size:

Discl.: Invested in OCCL


(amit) #307

Hi Ayush,

I was researching this topic and particularly Chinasunsine . Unfortunately
stock moved very fast to double in couple of months. Kinldy go through
Annual reports of Chinasunsine.

http://www.chinasunsine.com/index.php?option=com_content&task=view&id=19&Itemid=35

Barrier to entry in this case be technology but in chemical compounds i
dont think OCCL is innovator or has any patents on compunds or process.


(hemtan100) #308

What does it take to add new capacity in insoluble sulphur? In terms of project cost and timelines, companies including OCCL seem to be coming up with expansions in 15-18 months with minimal balancesheet strain.
Given this, it does seem that there are entry barriers as highlighted by OCCL in the form of quality improvements exhibited by the top 3 players (including OCCL) and quality gaps maintained over the rest of the pack.
The factor that buttresses demand for OCCL’s products is that indian demand is slated to grow in double digits over the next couple of years so any ramp up in Chinese supply should have limited impact.


(Deepak Venkatesh) #309

Hello

I was trying to understand what it takes to enter this market and my observations are as follows. Please correct me if you think my understanding is incorrect.

  1. Due to radial tyre uptake and effect/demand of high performance tyres the demand of insoluble suplhur per ‘unit’ tyre has increased. This is captured in the May 2017 presentation.
  2. A new entrant has to hurdle over three essential roadblocks
    a) Infrastructure investments: If you look at the asset block in the latest balance sheet and schedule 10 we realize that over 50% of the asset value comes from own land, factory, plant and machinery. This would require setup capex.
    b) Product lines: OCCL offers different varieties of insoluble sulphur ie regular, high stability and specialized grades. This learning curve would have to be traversed by a new entrant. Though after searching in Google patents I could not find anything related to OCCL. At the same time OCCL is working on newer products and investing in R&D to stay ahead.
    c) Any new customer ie tyre company requires minimum 24 months to validate and approve the quality of insoluble sulphur from the new supplier. So this gives a lead time to OCCL and other players. Also we need to ask why would the tyre manufacturers switch to a different supplier? Lower pricing or quality issues? Does this appear to be a sort of a moat?

From an industry perspective it seems to be in a favourable zone.

Rgds
DV

Disclosure: tracking amount


(mehta.piyush44) #310

i dont think any perosn or company will not allow raw material if it is available cheaper the 24 month time is just a myth i feel ithey can do lab testing of the raw material and go ahead if the properties are equivalent only if they can diliver better product and reasonable price they wont be replaced CHINA IS A BIG THREAT TO COMPANY I FELL IF THEY ARE NOT ABLE TO BE COMPETITIVE