InvestorQ : I have been tracking Goa Carbon for some time when the price was falling sharply. Should I buy the stock now as a long term mid cap bet?
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I have been tracking Goa Carbon for some time when the price was falling sharply. Should I buy the stock now as a long term mid cap bet?

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2 years ago
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Goa Carbon announced its Q1 results and it continued to report a loss in the June quarter. In fact, the net sales were up by 11% at Rs.138 crore and loss reduced to Rs.5 crore for the quarter. However, the stock has corrected nearly 70% in the last one year and you need to understand why the stock corrected so sharply in the last one year.

Goa Carbon is the second-largest manufacturer of CPC (calcined petroleum coke) in India, and has been facing weakness in its end markets. Of course, the company has also benefited in the last year by lower input prices. On the positive side, the Supreme Court had lifted ban on key raw material – green pet coke (GPC), which had impacted its production in the previous financial year. However, that ban has been lifted although the production may take some to come on stream.

What you need to understand is that Goa Carbon has a problem on the demand side too. In fact, it is currently operating at capacity utilisation of 76% and its major plants at Goa and Bilaspur had to be shut down for longer periods due to weak export and domestic orders. Operating margins were also in the negative due to constriction in demand.

The key risk for Goa Carbon is the recent commissioning of new CPC plants in China, leading to a glut in the market. Domestic users are procuring CPC from China due to low prices. It is better to stay off the stock for now.

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