Motilal Oswal's neutral NOCIL objective is Rs 205

 Motilal Oswal's neutral NOCIL objective is Rs 205

In its research report dated November 5, 2023, Motilal Oswal suggested a Neutral rating on NOCIL with a target price of Rs 205.

The NOCIL study report by Motilal Oswal

In 2QFY24, NOCIL's EBITDA/kg was INR34.3, down 34% YoY, in accordance with our prediction. Sales volumes did, however, rise 9% YoY to 12.9tmt. In FY24, the management thinks there may be some positive volume increase. Down 17% YoY, realization was higher at INR273/kg. The management brought attention to the fact that in 2Q, aggressive dumping continued due to a deficiency in both internal Chinese demand and export markets to which China normally provides rubber compounds. Lower realizations were the result of aggressive pricing, which had a detrimental effect on the company's performance throughout the quarter.  The latex market is still experiencing low demand, with 50% of its high levels from CY21 and early CY22 being reached. Chinese companies are fierce competitors in this market as well. Previously, latex made up 30% of NOCIL's export volume; now, it only makes about 12–15%.

Prospects

We downgrade the stock to Neutral because it has underperformed since our inception and because future profits are probably going to be lower. Additionally, we have lowered our goal multiple from 25x to 20x. The stock is selling at around 13x FY25E EV/EBITDA and about 21x FY25E EPS of INR10.2. We want to sell for INR 205.