Share Price Down 33% From 52-Week High, Buy Stock For 23% Likely Return: Motilal Oswal

Leading brokerage firm Motilal Oswal has given a buy rating to the stock of Nocil. The company's management believes that demand is expected to be muted for the next couple of quarters and its guidance of optimal capacity utilization for its expanded capacity is uncertain and could well go beyond FY24.

Stock To Buy: Target Price

The Current Market Price (CMP) of Nocil is around Rs. 229. Motilal Oswal has estimated a Target Price for the stock at Rs. 283. This stock has the potential to give a 23% return, in the upcoming 12 months. It is a small-cap stock with a market capitalization of Rs. 3,668 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 229
Target Price	Rs. 283
Potential Upside	23.00%
52-week high share price	Rs. 294.90
52-week low share price	Rs. 190.70

Stock Valuation

Retaining the buy status, Motilal Oswal mentioned, "Due to the miss in estimates in 2Q and slowdown in the global economy, we cut our EBITDA/EPS guidance for FY23 by 12%/13% and by 9%/ 11%, respectively, for FY24. With oil prices hovering around USD95/bbl and realizations remaining strong, we up our revenue estimate by 8%/5% for FY23/FY24, respectively. The stock is down 7% and has underperformed the Nifty index in the last six months. Valuing NOCIL at 22x FY24E EPS, we arrive at our target price of Rs. 283. We reiterate our Buy rating on the stock."

Q2 Earnings

Revenue came in below our est. at Rs. 3.9b in 2QFY23. Gross margin was at 47.1% in the quarter. EBITDA was at Rs. 615m in the quarter. EBITDA margin was at 15.8% in 2QFY23. PAT was at Rs. 359m in the quarter. EBITDA at Rs. 51.9/kg missed estimate, with realization being flat QoQ. Raw material costs in 2QFY23 were also flattish QoQ even as volumes declined 13% YoY and 23% QoQ at 11.8kmt, as a result of the global recessionary trends, which primarily impacted export volumes QoQ. Domestic volumes, however, showed moderate growth.

Disclaimer

The above stock was picked from the brokerage report of Motilal Oswal. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.