Business
Neutral NOCIL; target of Rs 205: Motilal Oswal
Neutral NOCIL; target of Rs 205: Motilal Oswal
About this update from Nocil Limited
Motilal Oswal's research report on NOCILNOCIL's EBITDA/kg stood at INR34.3 in 2QFY24, down 34% YoY, in line with our estimate. However, sales volumes increased 9% YoY to 12.9tmt. Management believes that there could be some positive volume growth in FY24. Realization was up at INR273/kg, down 17% YoY. Management highlighted that aggressive dumping persisted in 2Q, driven by a lack of domestic demand in China and export markets where China typically supplies rubber chemicals. Aggressive pricing negatively impacted the company’s performance in the quarter, leading to lower realizations. Demand from the latex industry still remains subdued with the industry operating at 50% of peak levels observed in CY21 and part of CY22. There is high competition from Chinese players in this industry as well. Latex volumes, which typically accounted for 30% of NOCIL's export volumes, have now decreased to 12-15%.OutlookThe stock has underperformed since our initiation and with earnings likely to be weaker going ahead, we downgrade the stock to Neutral. We have also cut our target multiple from 25x to 20x. The stock is trading at ~21x FY25E EPS of INR10.2 and ~13x FY25E EV/EBITDA. Our target price is at INR205.For all recommendations report, click hereDisclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.NOCIL - 05 - 10-2023 - moti