Sharekhan's research report on NOCIL
Q2FY23 performance was subdued with a miss of 19%/37%/45% in revenue/operating profit/PAT at Rs. 389 crore/Rs. 62 crore/Rs. 36 crore, down 24%/40%/46% q-o-q. The large miss was due to sharply lower-than-expected volume (down 23% q-o-q) and higher per unit opex on lower utilisation and elevated energy cost. Steep volume decline of 13%/23% y-o-y/q-o-q to 11,817 tonnes was on the account of lower export volumes given a recessionary trend in key markets while domestic volume witnessed some improvement. Despite beat in per unit gross margin, EBITDA margin of Rs. 52/kg (down 22% q-o-q) missed our estimate as beat in realisation was more than offset by higher per unit opex on volume decline. Management expects near-term export demand to remain under pressure given recessionary trend and its difficult to guide on timeline to achieve optimum utilisation. Having said that, NOCIL is confident on long-term growth, aspires to improve market share and sees growth from Europe plus one opportunity. We have lowered our FY23-24 earnings estimate to factor lower volume/margin assumption.
Outlook
We maintain a Buy on NOCIL but lower the PT to Rs. 305 to reflect earnings cut. Our expectation of earnings recovery over FY24E-25E, potential gain in global market share (benefit of China/Europe plus One strategy) makes valuation attractive at 16.5x/14.3x FY24E/FY25E EPS.
For all recommendations report, click here
Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Discover the latest business news, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!