Emkay Global Financial's report on Apcotex Industries
Apcotex’s Q4FY20 revenue came slightly ahead of our estimates (down 23.8% yoy), mainly due to lower realizations, with volumes holding ground (flat yoy/up qoq). Export markets, aided volume growth, due to diminished market price differentials. EBITDA margins came above our estimates, owing to a higher revenue base and lower raw material costs. Furthermore, gross margins expanded 250bps yoy. Feb-Mar’20 saw good demand for key products. However, due to the lockdown and supply chain issues, ~ Rs170mn of topline was lost, along with stretched working capital. Management sees next 1-2 quarters under stress and is laying out steps to better position Apcotex to benefit from ensuing demand post-recovery.
Outlook
Hands-on approach to maximize the capacity utilization would garner benefits in the medium term. We introduce FY23 estimates, forecasting topline growth at 23% CAGR (FY21-23E). We roll forward our valuations to arrive at a TP of Rs120 (earlier Rs114), and maintain our Buy rating, with UW in EAP.
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