Phillips Carbon Black Ltd Research ReportCo.update

ADD ruled out, fundamental demand drivers stay intact In a recent notification, the Ministry of Finance has denied extension of antidumping duty (ADD) on imports of carbon black (used for rubber application) into India largely from China & Russia. It is amid the Commerce Ministry proposing an extension of ADD. This comes as a negative surprise to us but does not change any business dynamics for the domestic carbon black players, as of now, including industry leader Phillips Carbon Black (PCBL). As highlighted in our recent report (dated December 28, 2020), extension of ADD just ensures better volume offtake for carbon black players and by no means implies better pricing or profitability. We remain confident of better sales volume prospects and profitability at PCBL, reiterating our positive stance on the company. Domestic demand-supply favourable, bottoming of CV space to provide further fillip to carbon black demand! As per industry estimates, as of FY20, domestic effective capacity of carbon black is pegged at ~11 lakh tonne with domestic consumption pegged at ~9.5 lakh tonne, thereby implying industry operating at ~85%+ utilisation levels. On the import-export front, carbon black exports in FY20 were at ~1.4 lakh tonne, with imports at ~1.9 lakh tonne, implying net imports of ~0.5 lakh tonne.