East India Securitie's report on NOCIL
Key takeaways from NOCIL Annual Report FY20 are as follows. NOCIL - (a) is a preferred supplier across the globe to major tyre OEMS’s having long term relationship (b) has an extensive product basket with presence across entire range of rubber chemicals and strong position in high value added products (c) focuses on specialized products in exports to cater to global needs and (d) has a strong focus on R&D to deliver new generation niche products. We believe the growth triggers are set in place led by (a) doubling of capacity to 1,10,000 TPA to lead future volume growth (b) rubber chemical prices after witnessing 10 year low in June 2020 are set to rebound backed by favorable demand and supply and (c) tyre sector performance to gradually improve led by uptick in replacement demand and likely rebound in OEM sales owing to decline in Chinese Truck & Bus Radial (TBR) imports.
Outlook
We believe the current valuations are discounting rebound in profits. Considering the future growth visibility of this net cash company with strong dividend payout history, we assign HOLD rating with target price of INR 121 per share.
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