Axis Securities: Oriental Carbon & Chemicals - Demand Recovery, Capacity Expansion To Drive Growth
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Axis Securities Report
Oriental Carbon and Chemicals Ltd. was one of the few companies in auto ancillary space that reported profit after tax despite decline in revenues due to closure of manufacturing facilities due to lockdown.
The company reported revenues of Rs 48 crore, Ebitda of Rs 5 crore and profit after tax of Rs 0.6 crore in Q1 FY21 amidst lockdown when the demand for the product- Insoluble Sulphur (IS) which goes into vulcunisation of rubber mainly for tyre industries had dropped.
The month on month improvement in sales volumes for automobile industry is indicating bottoming out of demand for the sector.
With the good monsoon and good harvest for rabi crop, the domestic rural economy is expected to come back with vengeance, the urban economy would follow though it is currently struggling with intermittent lockdowns.
As the economy gets back to its feet and more vehicles start plying on the road, the wear and tear of tyre would push the demand for tyres in replacement segment which is responsible for 70% of the overall tyre demand.
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