BQ Prime's special research section collates quality and in-depth equity and economy research reports from across India's top brokerages, asset managers and research agencies. These reports offer BQ Prime's subscribers an opportunity to expand their understanding of companies, sectors and the economy.
Motilal Oswal Report
Nocil Ltd.'s Ebitda/kg stood at Rs 40.4 in Q1 FY24, up 13% QoQ, in line with our estimate. However, sales volumes declined 2% QoQ to 13.5 tmt due to lower export volumes caused by inventory destocking and recessionary pressures. Realisation was up 3% QoQ at Rs 295/kg but down 12% YoY.
A decline in latex volumes was partly offset by increased offtake from tyre companies. Latex, which constitutes 10-15% of Nocil's total export volumes, fell 56% YoY in Q1 FY24. European tyre manufacturers are also experiencing demand challenges. The management anticipates Q2 volumes to be comparable to those in Q1 FY24.
Chinese players are selling rubber chemicals at lower prices due to weak domestic demand, creating tough competition for Nocil. However, the management foresees pricing normalisation in H2 FY24 when China's domestic demand is expected to recover.
Optimal capacity utilisation for the expanded capacity is uncertain and may extend beyond FY24 due to an uncertain global macro environment, delaying full utilisation, as expected, by September 2023.
As a result, we reduce our revenue, Ebitda, and earnings per share estimates for FY24 by 7%, 6%, and 5% respectively. However, our FY25 estimates remain largely unchanged, with Ebitda/kg at Rs 45.5 for FY24E and Rs 49 for FY25E.
The stock is valued at 17 times FY25E EPS (Rs 13.2) and 10 times FY25E enterprise value/Ebitda.
Return ratios are expected to remain stable at 10-13% in FY24-25. We maintain our 'Buy' rating with a target price of Rs 265.
Click on the attachment to read the full report:
DISCLAIMER
This report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime.
Users have no license to copy, modify, or distribute the content without permission of the Original Owner.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
