The no-delivery factor apart, the sales between September and December 1998 has been the lowest in the past three quarters. It stood at Rs 23.52 crore; much lower as compared to Rs 29.47 crore during July to September, and Rs 28.64 crore during April to June. On the operational front however, it has been able to improve its margins. The OPM during the first quarter stood at 16.58 per cent; a little higher as compared to the 16.25 per cent margin recorded during July to September.

What seems to have helped the company is an additional import duty of 10 per cent on the company's main product, carbon black. Thegovernement had imposed a safeguard duty during October last year which was valid for five months. Earlier, domestic carbon black producers suffered due to cheaper imports from the South-East Asian countries.

The stock prices of other carbon black manufacturers, however, did not register much change as they could not attract buyers. Phillips Carbon is one such poor performer. Despite being the leader and reporting comparatively better results, the stock did not attract any buying interest. The company has the largest capacity of two lakh tonnes in the country and a two-third market share.

During the first quarter (September-December), Phillips too achieved relatively high operating margins. OPM during this period stood at 11.57 per cent; much higher as compared to the 10.16 per cent margins achieved for the year ended September 1998. Here too, higher realisation had helped on account of the safeguard duty.

A comparison of Phillips Carbon and Cabot India suggest that the later enjoys higher marginsmainly due to its cost cutting abilities. Cabot's OPM has been at 16 per cent plus whereas the same for Phillips is around 11 per cent. Not only on the financial front, Cabot has been able to perform well on the bourses as well. Although thinly traded, the liquidity is comparitively good on Cabot's counter. As against Phillips' equity of Rs 17.75 crore, Cabot has an equity of Rs 8.74 crore. Cabot's stock has done exceedingly well as compared to that of Phillips Carbon. Huge losses posted by a Phillips' subsidiary have also affected the stock's performance.

The outlook continues to be negative for the sector as a whole as demand is yet to show signs of improvement. The tyre industry, which is the single largest customer for the carbon black manufacturers, has been facing a slowdown in demand. Besides, the over capacity problem will continue to have its impact. Once the safeguard duty is lifted in March 1999, the producers may be forced to reduce their selling prices. Even if that does not happen, an uptrendin carbon black prices is unlikely, at least in the short run. Industry observers, however, feel that the forthcoming budget may see a hike in import duties. And that might provide some relief to the sector besides serving to bolster stock prices.

But for the stock market, unless the demand from the main consumer (the tyre sector) shows a sharp recovery, its behaviour towards the carbon black stocks will continue to remain negative.

But in better times, Cabot India would be a clear winner in valuations in that indutry. For its cost cutting abilities, the company will show a sharp jump in margins. And being the more fancied stock, the appreaciation in the stock will also be higher for Cabot India.