Oriental Carbon and Chemicals Ltd


(Varadharajan Ragunathan) #141

Thanks to all VP-ers

bought a small quantity at Rs. 380. waiting for a pull back and will keep adding - if it sustains 3-4 quarters of growth, one should get a 25 % + growth plus a PE re-rating 9when it happens) as a bonus.

** find up. **


(Mokhtar Yaveri) #142

I was wondering if OCCL’s valuation ran ahead of its fundamentals. But the ‘Make in India’ campaign has re-ignited some hopes and OCCL could largely benefit from it.


(JKS) #143

Vivek and others…the stock tanked today 6% (for no apparent reason, other than the nifty fall, hopefully) and with very low volumes. time to enter?


(Varadharajan Ragunathan) #144

have full conviction on the story now - The No.2 in an oligopolistic industry as Avis says ’ tries harder".

Based on the primary research I have done, OCCL seems to be a VFM supplier that supplies the same quality IS at 15% cheaper than an import with better consistency and quicker TAT

Since IS is only 0.5 % - 1% of the total COGS of a tyre, a lot of tyre OEM’s might not mind going with a local supplier whose faces they can see and call every day.

The one fly in the ointment I am still not sure of is how much presence the company has in CV tyres - apparently, the company is strong in TW/car tyres but there the amount of IS and the grade does not necessarily translate to higher GM.

Apparently, the larger and more hard wearing the tyre, the tougher are the requirements of IS - for eg., earth moving equipment, volvo bus radials etc. where requirements are tougher as these tyres run continuously, and at higher temperatures and have a lot more load to carry

I am not clear from AR’s what kind of presence the company has in the CV/earth moving equipment tyres - that can move up margins further.

Does someone know anyone in a tire company on the procurement side ? if yes, please PM me.


(vaibhav) #145

It has been falling, but on very low volumes. For ex. on 14th Oct. , total of just 1935 shares were sold in delivery which equals to arnd 6.4 lac rupees and company’s market cap is 350 Cr. -

http://www.moneycontrol.com/deliverable-volumes-price/orientalcarbonchemicals/OCC

Disclosure : bought today.


(Varadharajan Ragunathan) #146

when are results due for OCCL ?

Link: http://www.moneycontrol.com/deliverable-volumes-price/orientalcarbonchemicals/OCC


(vaibhav) #147

31st October. (interim dividend will also be decided on that day) -

It has been falling, but on very low volumes. For ex. on 14th Oct. , total of just 1935 shares were sold in delivery which equals to arnd 6.4 lac rupees and company’s market cap is 350 Cr. -

http://www.moneycontrol.com/deliverable-volumes-price/orientalcarbonchemicals/OCC Link: http://www.moneycontrol.com/deliverable-volumes-price/orientalcarbonchemicals/OCC

Disclosure : bought today.


(Pradeep boob) #148

The Q2 results are out…numbers looks good…margin also increased…very good set of numbers…further good growth is seen in this counter as crude is falling which will benefit in the profit margin and tyre companies are giving good sales part which indirectly benefitted this company…an interim divident of Rs. 3 is given which really add ice on the cake…I think it’s a value stock and must sit tight with it…I m very bullish on this stock and and try to add more…it’s still looks very cheap in compare to the market…and a very low volume stock …I am watching this stock that thr r very less sellers in this stock…it is nt yet fancy stock but once it get attracted by the market I think it will give unimaginary returns…

Disc:- I own this stock and hoping to add more


(Nikhil Moryani) #149

It is surprising to see Solutia (Crystex) and Shikoku (Mu-Cron),the two competitors of OCCL also exporting to India. India imported around 775 MT of insoluble sulphur in 2Q Fy15 itself,OCCL’s domestic volumes were around 6000 MT (30%) for entire Fy14.

https://www.zauba.com/import-insoluble+sulphur-hs-code.html

Can someone clarify why is OCCL not catering to this demand? Are global tyre cos. sticking to Crystex from Solutia for their plants in India? Is the imported product superior,the same also doesn’t seem cheaper when one infers from OCCL’s export data on the same site.


(Varadharajan Ragunathan) #150

Nikhil

-From the scuttle butt I did, it is because there are pockets which are price sensitive and operate on L1 - hence they prefer chinese imports (kerala, two wheeler moped tyres etc.)

)- Also, what’s worthwhile noting is that every tyre manufacturer always have two suppliers in the ratio of 70:30 or thereabouts to make sure that there is no dependence on only one supplier - so, imports will happen

)- Also, for high -end tyres like michelin etc. where price is no bar (cars upwards of 20 lakhs), they still would never go with an indian manufacturer - for eg., S class, porsche which operate on a “one model for the world” model. So, they would import IS too.

Nothing to worry about - as long as OCCL’s share in domestic market grows ahead of import growth, we’re ok. Can you track that ?

And as long as export growth is about 5-10% for OCCL, we’re again doing alright. How does one check that ? Can you please check and confirm.

It’s late, but also find attached a write-up I posted on OCCL after a month of fairly deep research. It’s a high conviction stock for me.

oriental-carbon-SZ-write-up.docx (20.8 KB)


(Prasanna Sankaranarayanan) #151

@Varadharajan: I like your write-up. The biggest catch is if the PE re-rating to 15 will occur or not, which is another way of asking, if the company is a cyclical or not.

If the auto-sector is a cyclical, is this also not a cyclical? If not, why did demand slow down during the auto-slump the past few years. ARs clearly mention management trying to expand sales to new customers in EU and US, with difficulty and slowing sales.

Thanks


(Nikhil Moryani) #152

Raghunathan ji,

Thanks for the write up. The export data on a couple of websites is incomplete and cannot be tracked. The import data seems reliable if compared to govt.'s data in following link.

http://commerce.nic.in/eidb/Icom.asp

Use the HS code 28020010 as mentioned in detailed import data from the link in previous post. I think 28020010 also consists of goods other than IS,so not completely reliable.

Next big trigger for the co. is radialization of truck/bus tyres as mentioned in the AR,IS is has increased use in production of radial tyres. Only 30% of truck/bus tyres sold in India are radials and the proportion is poised to go up if you look at the ARs of tyre manufacturers in India,even recent capacity additions by these manufacturers for radials adds confidence.


(Nikhil Moryani) #153

My bad,28020010 is the HS code shown in export data. Import is being done under various HS codes and hence it would be impossible to comprehensively figure out the import/export movement.

[

http://commerce.nic.in/eidb/Icom.asp](http://commerce.nic.in/eidb/Icom.asp)


(Vivek Gautam) #154

Major positive for radial tyre makers and OCCL. Cross ply tyres allow overloading.


(Vivek Gautam) #155

It’s a long awaited step in right direction. Corrupt congress n state govt controlling RTOs have been responsible for mess. Radial tyre penetration is lowest amongst Indian truck HCVs.

Occl should move into next orbit if execution happens correctly on ground level. Inclusion of truck owner,consignee,toll road operator and increase in penalty to 35 K from 3 K for first time offence and cancellation of permit for 2 nd time was long over due. Hats off to Gadkari n BJP govt.


(Varadharajan Ragunathan) #156

I would’nt get too excited by this - this over loading ban happened in 2005 or thereabouts but enforcement has been weak. Look at the number of people breaking any traffic signal in any city in India at any given moment and you will know what I mean. Even Gopinath Munde was a victim of the lax road law enforcement.

This happened in 2005 and nothing changed post. I am in touch with someone from Sundaram Finance and he says this is just a recurring empty talk and nothing changes ever. A few gandhis at every check post can solve any problem in India.

On a lighter note, these talks are the ultimate “reversion to mean” - a few days everyone talks about it and then it’s forgotten. I would never bet on anything that requires a lot of enforcement and consistent intervention by the government - I prefer tailwinds created by policy actions - like increasing FDI investments, easier clearance for road projects etc.


(vinamra chaware) #157

Der Nikhil

zauba.com will give detail import export data

[

http://commerce.nic.in/eidb/Icom.asp](http://commerce.nic.in/eidb/Icom.asp)


#158

i have seen lot of people liking this stock at current valuation , but what about the growth ? company is already running at good capacity utilization and there is no further addition in capacity .

Only possibility is the margin expansion through crude is main raw material.


(Varadharajan Ragunathan) #159

Vishal

I agree - I think one of the issues with this stock is that the management does not communicate anything - no conf calls, no investor presentation, nothing.

We will know post Q3 results about how volume/sales growth are shaping up


(Anil) #160

Dear Vishal,

I spoke with teh management a while ago. I was told the main raw material is not crude (as I assumed). Instead it is Sulphur. I am not a technical person who can confirm or refute this statement. I tried to set up a meeting in delhi, but they showed no interest.

One thing I noticed- there is almost continuous decline in EBITDA margin since 3Q14. It was 30% in 3Q14, then fell to 29.7% in 4th quarter 2014, then fell to 25% in 1Q15 and latest figure is 23.9% in 2Q15. Any member has a view on this, please share.

Disc- not invested

Anil