Nocil - Eyeing Gradual Volume Recovery: Prabhudas Lilladher

Prabhudas Lilladher Report

We remain constructive on Nocil Ltd. post our visit to its Dahej (Gujarat) site spread over 50 acres, that houses various rubber chemicals manufacturing plants.

Management indicated gradual recovery in volume across markets (worst possibly behind in Q3 FY23) and improvement in capacity utilisation from hereon (currently at ~65%).

Debottlenecking is ongoing and will be completed by September 2023 (to increase capacity by ~5%). While company’s capex announcement is awaited (~15 months to commission thereafter), management is also evaluating its entry into adjacencies/ newer chemistries.

Nocil remains well placed over medium to long term led by-

1. domestic tyre industry capex,

2. China plus one strategy (as customers look for security of supplies),

3. sufficient capacity headroom enabling demand improvement and

4. net cash balance sheet (Rs 1.6 billion) and healthy free cash flow generation of Rs 5.5 billion over FY23-25E, though increase in supplies by Chinese competition pose risk to volume and spreads.

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.