MOSL: NOCIL (Buy)-Clarity over pricing power; higher margins to sustain
NOCIL: Clarity over pricing power; higher margins to sustain
(NOCIL IN, Mkt Cap USD0.6b, CMP INR277, TP INR340, 23% Upside, Buy)
- NOCIL reported higher-than-estimated realization (pricing action taken in Apr’21 to offset the increase in input cost), while volumes came in below estimates (as operating activity at the customer was interrupted for 2–3 weeks by the second COVID wave). This translated to in-line revenue, although margins expanded.
- The gross margin stood at INR129/kg (v/s INR94/kg in 4QFY21 and INR97/kg in 1QFY21). EBITDA also rose to INR55/kg in 1QFY22 (from INR33/kg in 4QFY21 and INR14/kg in 1QFY21), resulting in an EBITDA margin of 21% (+550bps QoQ), with conversion cost declining further to 28% (as capacity ramps up). Production ramp-up has been reported on a MoM basis for the past year. Utilization levels in July 2021 have exceeded pre-COVID levels on a monthly run-rate basis.
- The management has guided that with no further supply surplus in the market, NOCIL should be able to pass on the cost going forward as well. That said, it expects a moderately higher cost impact in 2QFY22 (as this comes with a lag of one quarter), for which the company has further corrected the pricing in July’21.
NOCIL Limited is an India-based company, which offers basic organic chemicals. The Company is engaged in the business of manufacturing and trading of rubber chemicals. The Company brands PILFLEX Antidegradants, PILNOX Antioxidants, PILCURE Accelerators, Post Vulcanization Stabilizer and PILGARD Pre Vulcanization Inhibitor are used in both domestic, as well as international markets. The Company's products include PILCURE MBT, PILCURE MBTS, PILCURE ZMBT, PILCURE F, PILCURE CBS, PILCURE NS, PILCURE MOR, PILCURE TMT, PILCURE ZDC, PILCURE ZDBC, PILCURE SDBC, PILCURE ZBZDC, PILFLEX 13, PILNOX TDQ, PILGARD PVI and PILCURE DHTS. The Company's manufacturing facilities include Navi Mumbai Plant, which is located in Navi Mumbai, Maharashtra, and at Dahej Plant, which is located in Dahej, Gujarat. The products manufactured by the Company are used by the tire industry and other rubber processing industries. Its PIL Chemicals Limited subsidiary is engaged in processing of rubber chemical products.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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