Oriental Carbon & Chemicals‘ stock price hit its 20 percent upper circuit at ₹361.05, marking a 52-week high on Tuesday, July 16, and extending its gains for the seventh consecutive session. The stock also hit its 20 percent upper circuit in the previous session on July 15, soaring over 67 percent in these seven sessions.
Also, with the stock hitting a new year-high, it has now surged 137 percent from its 52-week low of ₹152.34, hit on June 4, 2024. Just in July, the stock has zoomed 81 percent.
This rally follows the company’s annual report, which expressed confidence in a rebound as global prices start to ease. The report disclosed a 14 percent decline in standalone revenue for FY24, totaling ₹397 crore compared to ₹465 crore in FY23. Profit after tax decreased by 2 percent to ₹43 crore from ₹43.7 crore in the previous fiscal year.
In addition, HDFC Mutual Fund sold approximately 66,000 shares, or 0.66 percent of its stake in the company, for ₹1.64 crore in bulk deals on Friday.
Promising a strong outlook, OCCL Chairman Arvind Goenka stated, “As soon as the price pressure overhang in the global markets begins to ease, the company’s capacity utilization, realizations, and surplus should rebound, enhancing value for our stakeholders.” Currently, the company faces lower realisations and increased supply in the insoluble sulfur market due to expanded capacity by manufacturers.
The management emphasised in the annual report that steps are being taken to strengthen strategic directions. “The company will seek to increase sales to newly acquired customers, including an international tire major that commenced from CY2024,” Goenka added. He also mentioned the company’s aim to moderate costs to remain competitive during the challenging end of the downcycle.
The report highlighted that the company operated at around 70 percent capacity utilisation during FY24 and plans no significant capital expenditure in the near future. All surplus will be allocated towards maintenance capital expenditure, term loan repayment, and net worth accretion, strengthening the company’s fundamentals.
The management expressed optimism about the Indian automotive market, driven by increased disposable incomes, lifestyle aspirations, personal mobility needs, a wider choice of automobile brands, and the emergence of electric vehicles. They believe under-penetration of vehicles in India is likely to correct quickly, benefiting companies like OCCL with a strong market share and consistent customer retention.
The company aims to expand its market reach in India and globally, targeting a sustainable share of insoluble sulfur purchases. This sales visibility and improved sectorial realisations are expected to boost capacity utilisation and capital efficiency.
Demerger
In May, the board of directors approved a Scheme of Arrangement between the company and its wholly-owned subsidiary to demerge the chemical business. Shareholders will receive five equity shares of ₹2 each in OCCL for every one equity share of ₹10 each in Oriental Carbon.
In April 2024, the company received approval from the Honorable NCLT for the demerger scheme. This milestone is expected to unlock significant value within both the demerged and resulting companies, aligning with their unique risk-return profiles and cash flows. The demerger will also allow a sharper focus on individual growth strategies and expansion opportunities, optimising performance and value creation for stakeholders.
Overall, the stock has lost over 62 percent in the last 1 year and over 56 percent in 2024 YTD. Its 81 percent surge in July comes after a 69.6 percent and 12.9 percent decline in June and May, respectively. However, it took a breather in April, rising 14.3 percent. It was in the red in February and March, down 14.2 percent and 11.8 percent, respectively. Meanwhile, in January 2024, the stock gained 4.8 percent.
