Each week, Axis Securities comes-up with a stock ideas through its "Pick of the Week" report. This week the securities firm has picked the stock of Chemical player NOCIL. Though the ideal investment horizon for such ideas remain 6-9 months, its picks may provide some profit-making opportunities even to short-term investor.
Buy Nocil for an upside target of Rs 315, says Axis Securities
NOCIL is a part of the Arvind Mafatlal Group, and is the largest rubber chemicals company in India. The company has manufacturing units in Navi Mumbai, Maharashtra and Dahej, Gujarat. It's product portfolio includes accelerators, anti-oxidants, pre/post vulcanization products. The products manufactured are used by the tyre industry and other rubber processing industries.
Encouraging Market Conditions, says Axis Securities
According to Axis Securities, China Sunsine, a global leader in rubber chemicals saw a 22% volume growth and 38% rise in the ASP in H1FY21 and provided a positive growth outlook going forward which bodes well for NOCIL which as also experienced volume growth coupled with increase in ASP over the past few quarters.
Capacity augmentation to help
According to Axis Securities, the company has expanded its capacity in the recent times to 110,000 tonnes which is expected to add at least 10% volumes every year in the medium term and continues to ramp-up capacity utilization of the current capacity. NOCIL company has guided for capacity utilizations to reach 80%-85% by FY2021 end and reach full capacity by September 2023," the brokerage has said.
"The demand from the OEM segment has seen a could slowdown due to chip shortages, however the replacement demand could help offset the loss from OEM segment. This in-turn could benefit demand for rubber accelerators as demand for tyre increases thus benefitting players like NOCIL Ltd," the brokerage has further added.
"We expect NOCIL to register Revenues/Earnings CAGR of 41%/72% resp. over FY21-24E driven by uptick in demand in domestic and global market due to buoyant replacement and OEM led demand and improving realizations trend as witnessed globally. We value NOCIL at 20x its FY24E EPS (17 times earlier) given the strong earnings growth potential and have a target price of Rs. 315 per share with a buy on the stock," the brokerage has said.
We caution investors...
While we carry brokerage reports, which have a buy call from time to time, we wish to inform our readers that the Sensex has doubled from last year's peak covid level losses. On most parameters stocks are expensive that to low interest rates, accommodative policies and a gush of liquidity flowing into mutual funds. One has to exercise some caution and invest small amounts as a precautionary measure.
Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage houses are not liable for any losses caused as a result of decisions based on the article. The above article is for informational purposes only. Be careful while investing as the Sensex has now crossed 58,000 points. Investors can invest small amounts and avoid putting lumpsum.