| INITIATING COVERAGE |
| CMP: `170/- |
| Target: `227/- |
| Upside: 33.5% |
| 12th December 2018 |
| BUY NOW |
| Key Stock Data | |
| CMP | 170 |
| Market Cap (` Crs) |
2,803 |
| 52W High/Low | 236 / 140 |
| Shares o/s (Crs) | 16.45 Cr |
| Bloomberg | NOCIL IN |
| NSE Code | NOCIL |
| BSE Code | 500730 |
| Shareholding Pattern in % | |
| Promoters | 34.1 |
| Domestic Institutional Investors | 6 |
| Foreign Institutional Investors | 4.7 |
| Public & Others | 55.2 |
NOCIL LTD is the largest rubber chemicals manufacturer in India with a total capacity of 55,000 tones (including Dahej 15,000 tones) with current capacity utilization of 80%. Their manufacturing facilities are located at Navi Mumbai and Dahej. Major customers of the company are tyre companies like Apollo Tyres, Ceat Ltd., MRF Ltd. etc and other rubber products manufacturer.
INVESTMENT RATIONALE
A leader in rubber chemicals in India
It offers a wide range of rubber chemicals viz “PILFLex” (antidegradants), “PILnox” (antioxidants), “PILcure” (accelerators) and “PILGaD” (pre-vulcanisation inhibitor) and post-vulcanisation stabilizer. Its products are used in ndustries like tyre, industrial rubber products, consumer rubber products and other segments of the rubber processing industry. The company exports to various countries and has a strong global presence; exports form 30% of total revenue.
Capacity expansion could be on the cards
The Dahej plant has already reached 80% utilization rate. With the common infrastructure in place, it would be easier to set up additional capacities as and when the management feels the need. The additional capex can be done at minimal cost without putting a pressure on the finances. We feel this is likely to be undertaken by FY18E.
COMPANY BACKGROUND
into manufacturing and trading of rubber chemicals. The various products offered by the company are used by industries such as tyre, industrial rubber products, consumer rubber products and other segments of the rubber processing industry. The products include antidegradants, antioxidants, accelerators, post -vulcanisation stabilisers and pre-vulcanisation inhibitors. Domestic sales accounted for ~70% of revenue in FY15 and the balance is exports. In FY15, the company manufactured 46,266 tonnes of rubber chemical and their intermediates, against an installed manufacutered 6,266 tonnes of rubber chemical and their intermediates, against an nstalled manufacturing capacity of 55,000 tonnes (including Dahej of 15,000 tonnes).
The company has manufacturing facilities in Trans-Thane Creek industrial area at Navi
Mumbai Dahej. It is a fand recently commercialized plant in March 2013 at Dahej. It is a fully automated continuous process plant developed completely with in-house technology.
RISK
- Dependent on cyclicality of the automobile industry
- Volatility in raw material prices
- Cheap imports poses a major challenge
- Foreign exchange fluctuation, as exports contributed ~30% of revenue
VALUATIONS
NOCIL, the largest rubber chemical manufacturer in India with its diversified product portfolio and strong R&D capabilities is in the position to take advantage of global consolidation in the rubber chemical space. With major tyre companies consolidating their operation in and around Asia which is the major growth market, NOCIL is expected to benefit.
The Company has all the environment compliance in place which is the key problem faced by the Chinese counterparts, placing NOCIL at an advantage. Also with the anti-dumping duty protection in place and ramp up in its Dahej plant, financials are set to improve.
