1. On-Demand Equity Research Oriental Carbon & Chemicals
StockViews Analyst: Timothy Insko Current Price: Rs. 566.50
September 24, 2015 Current Valuation: Rs. 650
ORIENTAL CARBON & CHEMICALS LTD
BUSINESS SUMMARY
A Duncan JP Goenka group company incorporated in 1978, Oriental Carbon & Chemicals (formerly Dharuhera
Chemicals and Oriental Carbon) transformed itself into the third largest manufacturer of insoluble sulfur (IS) in the
world (behind #1 Eastman Chemicals and just below Japan’s Shikoku Chemical’s Corp) less than 20 years after
opening its first IS plant in 1994. In the company’s annual report, management breaks out operations into three
business segments (Chemicals, Automotive Products, and Pneumatic Products) due to the consolidated 50%
ownership stake of Schrader Duncan. However, when broken down into functional units there are essentially two
segments of the parent company, Insoluble Sulfur and Sulfuric Acid & Oleum, and Schrader Duncan as a
standalone business.
Organization Structure

2. On-Demand Equity Research Oriental Carbon & Chemicals
September 24, 2015
Segment percentages listed below assume consolidation of only 50% of Schrader Duncan revenue contribution due
to 50% ownership stake.
Insoluble Sulfur (83.3% of partially consolidated sales, 10.7% 3-year CAGR) - Insoluble sulfur, marketed under the
company’s brand name Diamond Sulf, is a vulcanizing agent added to rubber in the manufacture of tires, shoes,
latex, wire and cable insulation, and various other applications. IS shortens vulcanization time and improves quality
of rubber products and is therefore an extremely important additive. This segment of the business is primarily
dependent on the tire industry and counts many of the largest producers in the world as customers, including
Continental, Bridgestone, Goodyear, Cooper Tires, CEAT, Hankook, and Pirelli. OCCL has created multiple high
stability and specialty grades that have allowed the company raise margins over time. The company currently has
capacity to produce 23,000 MT per year with an addition capacity of 11,000 MTPA scheduled to come online in
2017 and 2018 (two phases). Over 70% of this segment’s revenues currently come from exports, with only early
phase expansion into US market.
Sulfuric Acid & Oleum (6.4% of partially consolidated sales, .9% 3-year CAGR) - The company’s original business is
now little more than an afterthought at less than 10% of sales. Sulfuric acid and oleum (aka fuming sulfuric acid)
are by-products in the manufacturing of insoluble sulfur which are used as a dehydrating agents, catalysts,
solvents, and adsorbents in batteries, detergents, dyes, and manufacturing in the chemical, steel, and
pharmaceutical industries. OCCL produces both battery grade and commercial grade sulfuric acid.
Schrader Duncan Ltd. (10.2% of partially consolidated sales, 5.8% 3-year CAGR) - In addition to the parent
company, OCCL also maintains a 50% stake in subsidiary Schrader Duncan Ltd. which produces tire valves,
pneumatic valves, pneumatic and hydraulic cylinders, pneumatic automation systems, and other related items.
End markets for the subsidiary include power generation, steel production, and cement plants and machinery.
Though the subsidiary has grown revenues by over 23% during the last three years, it has not been profitable on an
operating or net basis. Strategically, there appears to be little-to-no synergistic value to owning the Schrader

3. On-Demand Equity Research Oriental Carbon & Chemicals
September 24, 2015
Duncan stake and management has only articulated faith in the future hydraulic/pneumatic portion of this
business (which is only 50% of this 50% owned subsidiary).
As a whole, OCCL has grown revenues at a compound annual rate of 19.7% for the last decade. During that same
period, net margins moved from 4.9% to 17.4% due largely to strategic shifts in contract lengths and product mix
(more value added grades), increased capacity, better realized prices, and lower input costs. In addition, exports as
a percentage of gross sales have increased from roughly 40% to over 60% during the last 10 years.
INDUSTRY OVERVIEW
Insoluble Sulfur
At an estimated total demand for all grades standing at 250,000-270,000 tonnes/year (210,000 tonnes/year for
higher quality grades) and only three major producers, the insoluble sulfur market is niche, yet critical in the tire
manufacturing value chain. Though it is used in other rubber products, tire demand is ultimately responsible for
upwards of 80% of IS demand. In addition, because IS represents a fairly small percentage of tire production cost
and there are few substitutes for high quality grades, demand for insoluble sulfur is relatively inelastic.
Currently, OCCL is the third leading manufacturer of insoluble sulfur with sales in 21 different countries. This
position, however, likely overstates OCCL’s influence in this space as Eastman Chemical controls roughly 75% of
the global market relative to OCCL’s and Shikoku’s 11%-13% (though most of Shikoku’s insoluble sulfur supply stays
in Japan and Korea). In addition, there are several smaller firms, such as Germany’s Schill and Seilacher or China’s
Heze Great Bridge Chemicals and Shandong Sunsine Chemical that produce low grade IS that is used in non-tire
applications. Several factors contribute to the industry’s moderate barriers to entry. First, startup time and costs
and to produce high quality IS are prohibitively high. Second, approval and validation processes by end users can
last 1.5-2 years. To the first point, OCCL has been able to expand due to existing land, infrastructure and tax
benefits at Mundra. On the second, OCCL has already gained acceptance as an approved “second alternate
supplier” to the world’s largest tire producers. Quality and grade, in turn, dictates end market prices relative to
primary supply and demand factors. Overall, both Eastman and OCCL see demand for IS increasing by roughly 3%-
4%/year over the next 5 years due to continued growth in tire production and the increasing use of IS in tire
production. Both companies have new capacity coming online in 2017 in order to keep up with this demand.
Because of the relatively imbalanced oligopoly in the space, it appears that neither Eastman nor OCCL and are
willing, or motivated, to compete on price, while Shikoku appears content to remain geographically local.
Sulfuric Acid

4. On-Demand Equity Research Oriental Carbon & Chemicals
September 24, 2015
With over 200 million tonnes produced annually, sulfuric acid is more widely used than any other industrial
chemical in the world. Though it is essential in a wide variety of applications, the primary end uses are in fertilizer
production (>55%), metal processing (10%), wastewater treatment, petroleum refining, and chemical creation.
With high price volatility and hundreds of global producers (for which many, sulfuric acid is a by-product), this is
also the definition of commodity chemical. Volumes and prices are largely set by demand from the fertilizer
industry, supply of sulfur, and Chinese and North American industrial output. Global growth of sulfuric acid
consumption is largely tied to, but generally trails, GWP growth. Only the largest producer, Glencore subsidiary
NorFalco, has any semblance of pricing power in the space.
MANAGEMENT
Overview
Management has demonstrated a pattern of pragmatism in terms of adding capacity and conservatism in taking on
debt. In broad terms, manufacturing plant/line additions may seem aggressive on a percentage-added basis, but
building on a small existing capacity base, have been methodical and only occur as current capacity proves to be
short of demand from customers (and potential customers as in the Michelin case). They do not appear to build-
and-hope. Book debt-to-equity tends to remain at or below .5 and none of the promoters have borrowed against
their shares (“pledged”, a common practice in India) as of the end of Q1.
As a family group company, the usual nepotism applies. Chairman J.P. Goenka’s son, Arvind, is the managing and
executive director. Arvind’s son, Akshat, is a joint managing director while another son, Shreyans, is a senior
manager. This arrangement, however, appears to be working as Arvind has proven himself to be a fairly astute
manager. By restructuring operations and shifting contract lengths in order to pass through costs, the current
regime has increased growth and profitability substantially. In addition, current management has improved
communication with analysts and investors by conducting quarterly conference calls. However, while these are all
welcome improvements, investors should be aware that OCCL is largely an outlier in the Duncan JP Goenka group,
as most other held companies have failed to generate acceptable returns for some time.
Principles
Arvind Kumar Vishwanath Goenka (Managing Director, Executive Director) – 53 y/o, Managing director since Oct.
2009. Son of Non-Executive Chairman, Jagdish Prasad Goenka. Purported to be instrumental in restructuring OCCL
in the years prior to becoming managing director. In the 6 years since he took over, the company’s reported pre-
tax margins have averaged 21.6%. Compare this to 5.9% over the prior 6 years.
Anurag Jain (CFO) – CFO since May 2014. Prior to CFO role, served as VP of Finance at OCCL. Has been with the
company for 24 years. Also purported to be instrumental in restructuring that led to increased profitability.
Akshat Goenka (Joint Managing Director and Whole Time Director) – 27 y/o, nominated to the board in 2015. Son
of managing/executive director Arvind Goenka. U.S. educated (University of Pennsylvania (Wharton)). Was
appointed by the company as an executive in 2010, promoted to senior manager in 2012, and became a vice
president in 2014. Has already been a team lead in setting up a new manufacturing plant. Very likely to see
increasing responsibilities within the company.
Pranab Kumar Maity (Senior Manager of Legal, Compliance Officer and Company Secretary) – With the company
since 2012. Named Key Managerial Personnel. Previously with Shalimar Paints.

5. On-Demand Equity Research Oriental Carbon & Chemicals
September 24, 2015
CORPORATE GOVERNANCE
Regulatory Environment
Because many corporate governance issues are codified at the federal level, it makes sense to review the
overarching regulatory environment. Corporate law in India has seen a significant, positive shift in the last two
years with the passage and initial implementation of the Companies Act, 2013. With the goal of bringing Indian
corporate law closer to global standards, the Act improves transparency, accountability, shareholders rights, and
access to foreign capital. Highlights include: 1) creation of the National Financial Reporting Authority (NFRA) to
monitor, investigate, and enforce compliance with accounting and auditing standards, 2) substantially increased
penalties for accounting and auditing misconduct, 3) improvement of financial reporting standards, 4) increased
independence and effectiveness of auditors, 5) restriction of related-party transactions, 6) improved independence
of independent directors, and 7) the introduction of class action suits.
Though these highlights are not intended to be all-inclusive, they do highlight key provisions impacting corporate
governance. It should also be noted, that implementation of the Companies Act, 2013 is still in the early stages.
Significant clarifications, challenges, and debates are likely to occur over the next several years.
Oriental Carbon & Chemicals Specifics – Overall Corporate Governance Score: 6.5/10
The structure and effectiveness of OCCL’s corporate governance was evaluated using OECD principles. Each
category was evaluated on 15-35 indicators and scored on a 0-10 scale where 0 represents “inadequate”, 1-4
represent “minimally adequate”, 5-8 represent “adequate”, and 9-10 represent “outstanding”. Weights of each
category are listed.
Shareholder Rights (15%) – OCCL’s corporate governance framework, for the most part, protects and facilitates
the exercise of shareholder’s rights. Attendance and representation at the company’s AGM is adequate,
resolutions are well articulated, and voting is conducted easily and without obvious problems. However,
opportunities for shareholder inquiry at the AGM and full reports of directors’ performance are not present or
unclear. The major concern that exists is the control of over 56% of the shares by the Promotor group, almost all of
which are related to or controlled by the Goenka family. Category Score: 6/10
Equitable treatment of shareholders (20%) – OCCL’s corporate governance framework, to the extent possible for a
controlled company, ensures equitable treatment of shareholders. Directors are required to be re-nominated and
re-elected at regular intervals, cross-border voting is facilitated, shareholders are well informed in advance of the
AGM, and there are significant restraints on related party transactions. Much of this is enforced by the Companies
Act, 2013. However, there are significant limitations to items that minority shareholders can affect. It is also
unclear how the company deals with potential conflicts of interest, given the family group company status. Again,
shareholders are “equal”, but the Promotor group holds control. Category Score: 6/10
Disclosure and transparency (30%) – The corporate governance framework ensures that timely and accurate
disclosure is made on all material matters regarding the corporation, including the financial situation,
performance, shareholding, and compliance. Overall, the company is proficient at making available all information
necessary to make a fully informed investment decision (though largely due to recent implementation of the
Companies Act, 2013). Occasionally some searching is required, however, as some items and their locations on the
company’s investor relations website are not immediately obvious. Annual reports older than 4 years are not

6. On-Demand Equity Research Oriental Carbon & Chemicals
September 24, 2015
available through the company’s IR portal. In addition, inquiries to IR for the purposes of establishing greater
clarity on some items were initially ignored. When response was given to follow up inquiries, it appeared as though
management had little knowledge of total industry production capacity. Category Score: 7.5/10
Structure and responsibilities of the board (30%) – The corporate governance framework is only somewhat
adequate in ensuring the strategic guidance of the company, monitoring the management of the board, and
accountability of the company’s shareholders. The board meets regularly and appears to be well balanced. Audit,
Stake Holder’s Relationship, Corporate Social Responsibility, and Nomination & Remuneration Committees are
largely composed of independent directors and meetings are largely well attended. Overall, the company does
technically fulfil all the requirements laid out in the Companies Act, 2013. However, it is yet to be seen whether
the independent director will, in reality, be independent or if they are simply filling a seat. The nepotism inherent
in family group companies is well established and the Duncan JP Goenka group appears to be no different in that
regard. Ultimately it is likely that family group control overrides any illusions of independence in the board room,
leaving investors subject to whatever course Mr. Arvind Goenka wants to steer. Category Score: 6/10
Compensation/Remuneration (5%) – As required by the Companies Act, 2013, communication and disclosure of
director’s and key management personnel’s compensation are well articulated. Included in the annual report are
details of directors and executives compensation ratio to that of the median employee, percentage increases of
directors’, executives’, and employees’ compensation, how compensation compares to company performance,
and explanations of increases in compensation. Compensation of directors and executives are not extensively
composed of performance related bonuses (~25%), but are subject to regulatory ceilings. While the company does
an adequate job describing the qualitative factors that impact compensation, there are no quantitative measures
described. Category Score: 6/10
In summary, the Companies Act, 2013 has created a basis for improved corporate governance. OCCL is doing an
adequate job of implementing shareholder friendly policies, procedures, and disclosures. Make no mistake,
however, this is still a controlled company with little to no possibility of an outside shareholder making changes.
INVESTMENT THESIS
 Global tire market stability (long term) and synthetic rubber market growth. Even with a nearly 15%
drop from 2007 to 2009, global tire production demonstrated just below 4% compound annual growth
over the last decade. Several market research firms expect this stable growth trend to continue at just
above 4% over the next 5 years. When additional applications for synthetic rubber are included, market
growth may reach a CAGR of over 5%. This growth can be partially attributed to 1) increased demand for
high performance tires, 2) increased sales of aircraft tires, and higher safety demands thereof, and 3)
increased demand for replacement tires as vehicles continue to hold longer lifespans.
 Increased tire production and radialization of tires in India. With all four of India’s largest tire
manufacturers announcing plans for capacity additions in excess of $1.3 billion (USD), foreign
manufacturers moving to India (Michelin alone is investing $605 million (USD) in India to expand capacity
and R&D facilities), and OCCL being the only IS manufacturer in the country, domestic sales should surge
over the next 5 years. In addition, both local and foreign tire producers appear committed to increasing
the quality of their products, which will require higher percentages of IS per kg of tire rubber
manufactured (primarily for stability and durability). Beyond that, local producers are increasingly moving
to produce greater volumes radial tires as opposed to cross-ply tired due to both market demands and
the likelihood of local statutory changes (primarily the Road Transport & Safety Bill). Currently radial tires
only make 25% of the commercial vehicle tires in India and is expected to reach 60%-75% by 2020. Radial

7. On-Demand Equity Research Oriental Carbon & Chemicals
September 24, 2015
tires require substantially more IS to produce than cross-ply, meaning higher volumes for OCCL. Finally, it
also doesn’t hurt that one of the top 4 Indian tire producers (CEAT) is run by OCCL managing director
Arvind Goenka’s cousin, Anant Goenka.
 Greater targeting of North American market. Management believes North America represents the largest
end market for insoluble sulfur in the world. They also recognize that their presence in that market is
relatively limited (though, admittedly only began this year). While the company has already signed
contracts to supply two plants in the U.S., the hope is that they can compete for share as “second
alternate supplier” without significant margin erosion. Even minor improvements in North American
market share would allow for significant revenue growth.
 Increasing focus and value realization from specialty products. As the company continues to reinvest in
R&D, specialty grades of IS should continue to expand margins. In addition, if value added products are
positioned well and at lower cost than competing products, they could serve as a catalyst for increased
market share.
 Capacity additions at Mundra coming online in 2017 and 2018. With OCCL adding nearly 50% additional
capacity, a projected payback of 4 years (management estimate), and special tax exemption benefits, it is
highly probable that the Munda expansion will add immediate and long lasting value to shareholder
equity, even without assuming operating leverage. However, it is also likely that some reduction of fixed
and variable costs should be achievable from shared services. In addition, because of the increased
demand from domestic customers, OCCL should be able to reduce shipping expenses as a percent of
sales. Though there is certainly concern that this capacity expansion, coupled with Eastman’s upcoming
capacity expansion, may erode pricing, management believes that Michelin will absorb much of that
additional product (particularly when Michelin expands in India, as is currently planned). As the company
reported earlier this year, the sole reason Michelin is not currently a customer is due to OCCL’s lack of
capacity. In addition, Eastman Chemicals has commented that their Malaysian capacity addition allowed
them to shut down their highest cost IS plant in Sete, France. This, along with other comments from
Eastman Chemicals, indicates that European facilities are higher cost producers of IS and the most likely to
see production curtailed if capacity overwhelms market demand. Therefore, OCCL should be able to
maintain margins except in the most extreme circumstances. This sentiment is was echoed by OCCL CFO
Anurag Jain during the company’s May 15th
earnings call when he told analysts that margins would be
stable for at least the next 4-5 years.
 Companies Act, 2013 increases the possibility of acquisition. Though hurdles still exist, the
implementation of the Companies Act, 2013 certainly opens the doors to increased deal making in India.
As Eastman Chemical has realized the benefits of tacking on Solutia and their Crystex line of insoluble
sulfur products, so too could other chemical companies benefit from acquiring OCCL. Recognize, however,
that this is a somewhat low probability outcome due to the controlled status of the company.
RISKS
 Cyclicality of demand, volatility of raw material prices, and currency fluctuations. Although not 100%
dependent on the global auto production, this market still accounts for the majority of tire (and thus
insoluble sulfur) demand. Likewise, fertilizer producers, metals smelters, oil refiners, and other industries
all compete for global sulfur supplies. Though the U.S. Geological survey does not see any near term
capacity/demand imbalances in the sulfur market on the horizon, this will likely remain a threat over the
long term. However, it should be noted, with OCCL’s shorter term contracts implemented in 2009, the
company is less sensitive to raw material costs. In addition, with roughly 60% of OCCL’s sales being
derived from abroad, currency fluctuations will always have an impact on sales and margins.

8. On-Demand Equity Research Oriental Carbon & Chemicals
September 24, 2015
 Slowdown in China and continued uncertainty in the region. As was recently called out on both the OCCL
and Eastman Chemical conference calls, tire production in China is beginning to slow secondary to the
general economic slowdown and reduction in exports to the United States (largely due to “anti-dumping”
measures). This macroeconomic scenario looks to continue for the next year and may put pressure on
OCCL. Indeed, these and other pressures have already lead to the closing of Kumho Petrochemical’s and
Jiangsu Sinorgchem Technology’s IS plants in China (both of which were less than 5 years old). If
conditions persist or deteriorate further, the effects may be multiplied as OCCL brings on more capacity in
2017.
 Project delays in capacity additions. As is always the case, when adding large manufacturing lines, project
timelines can be delayed. In addition, the company has seen “bottlenecks” in their capacity in the past.
Any announced delays could be a catalyst for selling as institutional managers seek higher returns
elsewhere over the near term.
 Competition can always emerge. As of right now, the insoluble sulfur market is essentially a monopoly
with OCCL trying to create a slight shift toward oligopoly status. The conventional wisdom is that because
the IS market is a small niche market, large chemical producers will not invest heavily to gain share, and
small producers cannot afford to enter the market in a big way. However, Eastman Chemical is investing
in a 40,000 MTPA capacity increase at their Kuantan, Malaysia facility, set to come online in 2017. This is
nearly 4x the capacity OCCL is adding during the same time frame. In addition, it is conceivable that low
cost producers in China could shift gears and begin exploring production of higher grade IS. Though this
would not have an immediate impact on the market, it should be kept in mind that OCCL only began
producing insoluble sulfur in 1994 and became the second biggest producer in less than 20 years.
 Combined capacity increases may create an oversupply of insoluble sulfur and pricing collapse. While it
is true that the combined capacity increases of OCCL and Eastman Chemicals (51,000 MTPA) as a
percentage of current demand (19%) is less than projected demand increases (26% over 5 years),
projected demand may be overly optimistic. Because the 19% capacity increase is occurring in under 3
years and does not account for potential capacity increases from Shikoku or smaller competitors, it is
certainly possible that IS price declines could occur as these facilities come online. Also worrisome is that
Eastman management commented last September that the European IS market was already over
saturated (thus the Sete, France shut down) as tire production shifted to Asia. Although this geographical
shift to Asia may ultimately be beneficial to OCCL, the potential for oversupply warrants careful
monitoring. Beyond that, the promise of capacity absorption from a potential customer, Michelin, may go
unrealized. It should be noted, however, that any further plant shutdowns (which Eastman has already
shown a willingness to do in order to preserve current margins) would decrease the total net IS capacity
coming online and largely negate this particular risk.
 Potential for long term drop in the number of automobiles worldwide. With the advent and increased
acceptance of ride sharing applications on mobile devices (i.e. Uber, Lyft, etc.), there is an ever increasing
possibility that the total number of vehicles on the planet could, at minimum, stop growing. Beyond that,
it is the goal of many of these companies, and certain countries’ central governments, to reduce the
number of vehicles on the roads. While this is not a near term concern, any momentum gained by these
trends could shift future expectations for the IS market and OCCLs long term growth potential.
INTRINSIC VALUATION ASSUMPTIONS & CONSIDERATIONS
Basis

9. On-Demand Equity Research Oriental Carbon & Chemicals
September 24, 2015
 Valuation constructed in nominal rupees.
 OCCL valued on a standalone basis, 50% of Schrader Duncan market value owned by OCCL was added to
OCCL value.
 Assumed going concern. Perpetual stable growth achieved after 10 years.
Return on Invested Capital
 Operating margins normalized over 7 years. Held to recent period (as opposed to a longer time frame)
due to contract structure changes in 2009 and acquisition of controlling interest in Schrader Duncan =
24%
 EBIT adjusted by capitalizing R&D (tax benefit remains). In this case, demonstrated value add from R&D.
 Adjusted ROIC = 22.12%
 Adjusted slightly downward for margin risks discussed earlier: 21%
Reinvestment
 Standard capital expenditures normalized as a percentage of revenue over 10 year period to capture
major capacity additions.
 R&D treated as a capital expense, intangible asset was created, and amortized over 10 years.
 Non-cash working capital as a percent of revenues = 14.6%
 Adjusted Reinvestment rate (as a percentage of after-tax EBIT) = 44.06%
 Adjusted slightly downward to reflect lower total costs of plant additions relative to operating profit: 42%
Fundamental Growth Projection of Operating Earnings
 ROIC (21%) x Reinvestment (42%) = 8.82% compounded annually over 10 years, due primarily to
normalization in reinvestment, with some minor contribution from inflation.
Cost of Capital (as of 9/24/15)
 Cost of Equity
o Rupee risk free rate = (India Government 10yr Bond minus implied default risk spread) = 5.52%
o Market implied equity risk premium for India = 8.90%
o Bottom-up business beta (unlevered basic chemicals industry average, levered to OCCL D/E ratio
and current tax rate) = .75
o Total cost of equity = 12.24%
 Cost of Debt
o Rated by IRCA: A1
o Company default spread (1.26%) and India default spread (1.96%) added to risk free rate. Pre-tax
cost of debt = 8.76%
Perpetual Growth Assumptions
Equity Debt Total Capital
58,327.41$ 7,107.21$ 65,434.61$
89.14% 10.86% 100.00%
12.24% 7.01% 11.67%
Market Value
Weight in Cost of Capital
Cost of Component (after tax)

10. On-Demand Equity Research Oriental Carbon & Chemicals
September 24, 2015
 Growth: matching growth rate of GDP, using 10yr India government bond (minus the default spread) as a
proxy = 5.52%
 Debt ratio: slight move up toward optimal (based on capital structure analysis), but maintaining
controlling interests’ conservatism = 15%
 Equity risk premium: unchanged = 8.9%
 Beta: unchanged (slight increase in D/E is offset by maturity/stability of enterprise) = .75
 Cost of debt: very slight improvement in credit rating over a long period = 8.65%
 Tax rate: slight move up from likelihood of increased domestic revenues and counting 2% CSR
requirement as tax = 25%
 Total long term cost of capital: 11.38%
 Return on capital: slight excess return due to long term cost advantages and industry structure. = 14.85%
 Reinvestment: calculated by growth and return on capital assumptions = 37.17%
Illiquidity discount
 Based upon low monthly trading volume (< 2% of market capitalization/month), low revenues, and low
cash/market capitalization.
 Total Discount = 8.86%
RELATIVE PRICING
Regression Analysis
 Compares valuation multiples to 12 fundamental factors of 79 firms within the basic materials sector
(excluding metals, mining, and paper).
 Factors that did not have a statistical relationship to price were eliminated.
Base Year Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Growing Perpetuity
Growth Assumptions (EBIT) CAGR = 8.82% 5.52%
AdjustedOperating Income $7,357 $8,006 $8,712 $9,480 $10,317 $11,226 $12,217 $13,294 $14,467 $15,743 $17,131
Effective Tax Rate 18.50% 19.15% 19.80% 20.45% 21.10% 21.75% 22.40% 23.05% 23.70% 24.35% 25.00% 25.00%
After-tax Operating Income $5,996 $6,473 $6,987 $7,542 $8,140 $8,785 $9,480 $10,230 $11,038 $11,909 $12,848 12,710.26$
Less: Net Reinvestment $2,525 $2,334 $2,516 $2,712 $2,923 $3,150 $3,394 $3,657 $3,940 $4,245 $4,573 4,163.62$
Less: Chg. NC Working Capital $116 $385 $419 $456 $496 $540 $587 $639 $696 $757 $824 561.00$
Free Cashflowto Firm $3,354 $3,754 $4,053 $4,374 $4,721 $5,095 $5,499 $5,933 $6,402 $6,907 $7,452 $7,986
Cost of Capital 11.67% 11.67% 11.67% 11.67% 11.67% 11.67% 11.67% 11.67% 11.67% 11.67% 11.38%
Present Value of FCFF $3,362 $3,250 $3,141 $3,036 $2,934 $2,835 $2,740 $2,647 $2,558 $2,471 $45,211
Oriental Carbon & Chemicals Ltd. (Rs. in lakhs)
Oriental Carbon & Chemicals Ltd. 9/24/2015 Value Value/Share
74,185$ $720.51
4,473$ $43.44
78,658$ $763.95
(7,107)$ -$69.03
1,600$ $15.54
73,150$ $710.47
(6,481)$ -$62.95
66,669$ $647.52
Total Value of Equity
NPV of all operating asset cash flows
+ Net value of cash andmarketable securities (as of 9/23/15)
Value of Firm
-Market value of debt
+ 50% Market Value of Schrader Duncan
Illiquidity Discount (8.86% )
Total Value of Common Stock
Value of Equity/Share = 647.52

11. On-Demand Equity Research Oriental Carbon & Chemicals
September 24, 2015
 More reliable than a single factor analysis (i.e. P/E determined by growth, median EV/EBITDA of the
group, etc.).
 Caveats: multicollinearity may impact findings, sample was reduced due to incomplete data for some
companies, does not account for off balance sheet capital structure differences or outstanding equity
options of some firms.
Comparable Group Price/Earnings
 Group Median = 14.58
 25th
Percentile = 11.67
 TTM EPS = 49.84
 Target Price at Group Median = 726.67
 Target Price at 25th
Percentile = 581.63
POTENTIAL CATALYSTS
 Increased tire production capacity coming online domestically.
 Capture of additional customers in the United States.
 Economic recovery in Europe.
 Economic stabilization in China.
 Mundra capacity addition coming online in 2017.
IMPLICATIONS
From upcoming production capacity increases, to domestic demand increases, and little competition outside of
Eastman Chemical, there are several reason to like the Oriental Carbon & Chemicals’ story. While macro and
company specific risks remain and careful monitoring always remains prudent, it appears as though the general
market has not fully priced in the company’s long term potential. Additionally, in the short term, EBITDA is still
expected to grow in the double-digits due largely to local demand pushing up margins. Based on our analysis and
assumptions, OCCL appears to be both undervalued and mispriced, even in the current global macro environment.
Reasons for the present pricing may include reluctance of foreign investors, controlled company status, and lack of
significant, known catalysts until 2017. That being the case, we feel our intrinsic valuation has accounted for the
most likely risks and objections and we acknowledge that if all potential catalysts were known, they would be
already be reflected in the share price. It is with that rational that we recommend OCCL as a buy.
R Square 0.451 Coefficients t Stat
Standard Error 0.791 Intercept 1.2176572 4.3370097
Observations 79 Div. Yield % -0.0292743 -1.3253312
Op Margin 0.0860208 6.7026881
Beta -0.2924895 -1.9786245
Regression Statistics (P/S)
Predicted Price/Sales
2.685
Revenue/Share
290.390
Price $779.57

12. On-Demand Equity Research Oriental Carbon & Chemicals
September 24, 2015
Disclosures:
1. This Research Note is an accurate reflection of my views of the subject Company/Companies and their securities.
The information contained herein is accurate to the best of my knowledge.
2. I am not receiving any compensation in relation to this note. I have no business relationship with any company
whose securities are mentioned in this article.
3. I have no positions in any securities mentioned in this note nor do I plan to initiate a position within the next 72
hours.
Contact:
Timothy R. Insko
tinsko@inskoinvesting.com
+1 (319) 383-3075