Phillips Carbon Black (Phillips) reported better than expected Q3FY21 profitability mainly led by higher than expected volumes and better than expected product mix. Its EBIDTA was 68% above our estimates, said broking firm IDBI Capital Markets & Securities.

The company's sales volumes grew 16.0% YoY to 114 kt and its EBTIDA/tonne jumped 70% YoY to Rs16,203 led by better product mix. EBITDA increased 53% YoY to Rs 1,874 millionn and net profit jumped 80% YoY to Rs 1,250 million as interest cost fell 25% YoY to Rs 80 million.

Commenting on the result review, IDBI Capital said it has raised FY21 EBITDA estimate by 24% to account for Q3FY21 margin beat and rising share of specialty volumes. "We also raise our FY22/FY23 EBITDA estimates by 7%/8% as we now expect better margins led by improvement in product mix. We now value the stock at a PER of 12x FY23E EPS (earlier 10x FY23) and derive a target price of Rs 251 (previous Rs 194) and maintain our Buy rating on the stock."

"Replacement demand for tyres has picked up since Q2FY21. This, alongside improved demand from exports resulted in sharp recovery in Q3FY21 volumes for Phillips. We expect Phillips EBITDA/PAT to grow at a CAGR of 16%/24% over FY21-23E mainly led by improvement in product mix and higher volumes," it added.

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