NOCIL Ltd. share price target

Aggressive push for volumes led to realisation drop and dragged topline Company recorded sluggish results with net sales coming in at `1943mn (down ~25.6% YoY, down 7.4% QoQ) majorly impacted by pricing pressure for its products. Management stated that company had aggressively pushed volumes to maintain its wallet share from clients as rubber chemical demand continued to remain weak led by softness in automotive and tyre sector. Management believes current pricing of rubber chemical is at its lowest level...

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NOCIL for Q2FY20 posted Revenue of Rs. 210cr (23% YoY), EBITDA of Rs. 48.5cr (39% YoY) and PAT of Rs. 50.7cr (3% YoY) aided by tax cuts. The drag in Q2 performance was owing to severe slowdown in auto industry (domestic & global) that led to fall in volumes as well as realization.

Management is hopeful of auto-industry revival and expects sales volume to pick up for company in FY21E with commencement of commercial production at Dahej plant. Also, they indicated export share can increase as they are getting enquires from new customers...

Increased US import duty of 25% on Chinese supplies, augur well for Nocil as tyre majors look to diversify supplies. We tweak our FY20/21E earnings estimates to factor in muted H1 performance. While near term demand slowdown in China and India is a...

Established player in growing rubber chemicals industry, Growth in tyre industry to uplift rubber chemicals demand, Massive capacity expansion to drive volume growth, We initiate coverage with BUY rating and a target price of Rs. 137 i.e. ~21%

We trim Nocil's FY20-21E estimates by 10-13% as we lower EBIDTA margin and realization assumptions due to sub optimal capacity utilization from auto slowdown and benign raw material prices. China Sunsine (CS; Mkt cap- USD400m) is a world's leading rubber chemicals player with a production capacity of 172,000tons including 30,000tons of insoluble Sulphur. CS had a stellar CY18 led by high realization (+11%YoY) and increased volume (+8%YoY). Our analysis on CS Annual Report suggests that industry consolidation will continue considering China's strict...

Nocil for Q4FY19 reported weak set of numbers; mainly on the back of weak tyre demand. Revenue/PAT declined by 12%/30% YoY, with OPM contraction of 621bps. The slowdown in the auto sector and the uncertainty surrounding anti-dumping duty could to act as an overhang for the stock in the near term. However, we believe that with new capacities coming on stream, Nocil is well placed to (i) benefit from any auto sales revival and (ii) capture incremental demand from both global/ Indian tyre companies, given its long standing relationship...

We expect 18% earnings CAGR over FY18-21E. Nocil remains our preferred pick with attractive valuation of ~11x PER FY20E and ROEs of ~18%. Our recent plant visit to Nocil at Dahej reinforced our conviction on a strong growth outlook, notwithstanding near term demand dip due to weak auto...

growth of 5% YoY to INR2.6bn in 3QFY19; after posting strong growth in the last six quarters (average of 28%). Muted volume along with weakness in the realizations (~2-3%), affected the growth. EBITDA also grew 4% YoY to INR725mn as the margins were stable at 27.8% (down 17bps). Despite lower realizations, Nocil could maintain EBITDA/ton as the raw material prices also corrected. PAT was flat YoY at INR447mn, due to lower other income and higher depreciation and tax outgo. To capitalize on the growth opportunities, Nocil had earmarked capex of INR4.25b of which INR1.7bn (phase I) has commenced. Phase II of INR2.6bn is likely to come on stream by 1QFY20, post which the total capacity would double. Nocil Ltd* Phillips Carbon Oriental Carbon Source: Bloomberg, MOSL *MOSL Estimates Debt/Equity 0.03 0.02 0.