Introduction: 

NOCIL, part of Arvind Mafatlal Group, is India’s largest rubber chemicals company. Rubber chemicals, which possess properties such as antioxidation, antidegradation and lifespan extension, are used in the manufacture of tyres, tubes, latex goods, and footwear, among others. NOCIL today is the Largest Rubber Chemicals Manufacturer in India with the State of the Art Technology for the manufacture of rubber chemicals.

Image result for nocil limitedthe target prices comes to be around Rs 222, 34% upside from the CMP (Rs 166)

Investment Rationale: 

  1. NOCIL owns 50% market share in the domestic rubber chemicals and ~5% globally. 
  2. Domestic tyre manufacturers has target capex of Rs. 250 billion over the next five years. Accordingly, Nocil’s timely capex of Rs. 4.3 billion will double its capacity in stages through H2FY20. This positive growth can potentially double its revenue in FY21E, given the asset turn of 2x.
  3. China has toughen the norms for anti-pollution affecting the manufacturing and pricing of about 70% suppliers giving leverage to our domestic rubber suppliers. 
  4. Nocil’s EBITDA margins have increased 17% over FY14-18.
  5. Building capacity for the future: To capitalize on the growth opportunities amid favorable market conditions, Nocil invested in building Navi Mumbai and Dahej plants. This would double its capacity to 110,000 tonnes from 55,000 tonnes now. Improved technology and change in product mix boosted margins: Nocil employed fully automated process at its Dahej plant (commenced operations in Mar’13), which apart from achieving higher productivity also aided in significant cost rationalization. 


Financials:                                                                                                                    


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FY14

FY15

FY16

FY17

FY18

Revenues (Cr)

596

719

715

742

968

Growth (%)

21%

-1%

4%

30%

EBITDA (%)

10.2%

15.6%

19.3%

21.3%

27.2%

PAT (Cr)

24

57

78

97

169

Growth (%)

140%

37%

25%

74%

                 

  1. Over FY14-18, revenues and PAT have grown by 13% and 64% CAGR respectively
  2. NOCIL is a debt free company with impressive return ratios. RoE and RoCE stood at 17% and 26% respectively in FY18
  3. Expect Revenue & EPS CAGR of 23% & 20% respectively over FY18-20E driven by capacity expansion
  4. Valuing the company at 15x FY20E, the target prices comes to be around Rs 222, 34% upside from the CMP (Rs 166)


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