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Buy NOCIL; target of Rs 305: Sharekhan

Sharekhan is bullish on NOCIL has recommended buy rating on the stock with a target price of Rs 305 in its research report dated November 09, 2022.

November 13, 2022 / 09:53 PM IST
 
 
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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

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NOCIL - 10 -11-2022 -khan

Broker Research
first published: Nov 13, 2022 09:53 pm

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