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Dolat Capital Report
NOCIL Ltd. Q4 FY24 operating profit performance was below estimates with low Ebitda margin at 12.5% (-183 basis points QoQ) as realizations corrected sharply, even as raw material prices stayed firm. Continued influx from China due to higher capacity, is impacting realizations. Volumes grew 12% QoQ aided by growth across exports and domestic market.
Management indicated FY25E to see higher volumes versus FY24, aided by higher sales to new customers. It also believes spreads have bottomed out and may not fall further, though competitive intensity remains elevated.
Volume growth has been negligible over the last couple of years (2% for FY24); there remains enough capacity headroom to tap into demand recovery/growth.
We factor ~13% volume compound annual growth rate (FY24-26) and gradual recovery in spreads versus Q4 FY4, and arrive at target price of Rs 240 (20 times FY26); maintain ‘Sell' rating.
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