Buy NOCIL; target of Rs 270: Prabhudas Lilladher

Prabhudas Lilladher is bullish on NOCIL has recommended buy rating on the stock with a target price of Rs 270 in its research report dated November 29, 2018.

November 30, 2018 / 03:51 PM IST
 
 
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Prabhudas Lilladher's research report on NOCIL


We initiate coverage on Nocil with a 'BUY' and a PT of Rs277, based on P/E of 15x FY21E or 8.0x EV/EBIDTA FY21E. Nocil is India's largest manufacturer of rubber chemicals, with over four decades of experience. The company's technical capabilities and reliability has helped develop deep relationship with leading global and domestic tyre players. Nocil's earnings have increased 7x over FY14-18 led by 1) steady demand growth of 12.5% CAGR 2) higher share of specialty grade chemicals 3) benefit from Anti-Dumping Duty. Nocil remains well placed to capitalize on supply disruptions in China which accounts for 70% of global rubber chemicals supplies. Going forward, Nocil plans to double its capacities by H2FY20E to capitalize on domestic tyre industry capex (Rs250bn over the next five years) and global opportunities from disruption in China. Also, US has imposed 10% duty on rubber chemicals imports from China and will add another 15% duty from January 2019. This will open new opportunities for Nocil even though some Chinese supplies might be diverted to India.


Outlook


Initiate with 'BUY' and PT of Rs277 based on 15xPER FY21E. Net cash of Rs7.7bn for FY21E and healthy ROEs of 20% provide downside support.


For all recommendations report, click here


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first published: Nov 30, 2018 03:51 pm

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