NOCIL stock has delivered multibagger return to its long-term shareholders as it has zoomed over 1280 per cent in the last 10 years. If you look at the current share price, the stock is down over 24 per cent from its 52-week high of Rs 294.85, hit on September 12, 2022. The smallcap stock hit its 52-week low of Rs 201.45 on January 30, 2023, and has recovered over 11 per cent from its recent lows.
About the company
NOCIL is the largest rubber chemicals manufacturer in India, with a domestic and global market share of 40% and 5%, respectively. The brands PILFLEX Antidegradants, PILNOX Antioxidants, PILCURE Accelerators, Post Vulcanization Stabilizer and PILGARD Pre Vulcanization Inhibitor are well recognised in both domestic as well as international markets.
The company is a part of the AMG (Arvind Mafatlal Group) of Industries, a business house in India having diversified business interests. In 1975, NOCIL commenced Rubber Chemicals production in a designated ‘Chemicals Zone’ about 40 km away from Mumbai City.
Experts on NOCIL
Motilal Oswal, in its recent report, highlighted that the management of the company guided for debottlenecking in its existing units by Aug/Sep’23, even as it evaluates its plans for the next three-to-five years. Currently, specialized products constitute 25% of its total revenue with little room for expansion (the industry standard is less than 10%).
Despite global rubber consumption remaining flat in CY22 v/s CY21, due to the current global slowdown, NOCIL has been able to maintain its market share during the period, it said. Further, management expects that Europe+1 could play out over the medium term with no likely capacity constraints in the near future.
The brokerage has a ‘Buy’ rating on the stock with a target price of Rs 280, suggesting an upside potential of 25 per cent from Friday’s closing price of Rs 223.30.
ShareKhan said the long-term structural growth outlook remains intact supported by growth in the tyre industry and China/Europe plus one opportunity. A potential volume recovery and resilient margin would drive earnings recovery.
It believes that NOCIL is a play on import substitution and China/Europe Plus One strategy by global customers and this would drive market share gains going forward. Valuation of 16.9x/14.4x FY24E/FY25E EPS is attractive considering our expectation of a sharp PAT recovery (post subdued FY23) over FY24E-25E and improvement in RoE to 14% (versus FY23E RoE of just 9.7%). It has maintained a ‘Buy’ call on NOCIL with a revised target price of Rs 275.
Despite near-term demand weakness, Prabhudas Lilladher believes that NOCIL remains well placed over the medium to long term on domestic tyre industry capex, China+1 strategy, sufficient capacity headroom, net cash balance sheet (Rs1.6 billion) and healthy FCF generation of Rs 5.4 billion over FY23-25E. However, it said that the increase in supplies by Chinese competition pose risk to volume and spreads.
Also read: Multibagger stock: Up 1,360% in 10 years! ICICI Securities sees further upside in this midcap stock