Buy NCL Industries, target price Rs 108: Anand Rathi

Anand Rathi has given a buy rating to NCL Industries with a target price of Rs 108. The share price moved up by 1.07 per cent from its previous close of Rs 74.45. The stock’s last traded price is Rs 75.25.

The general slowdown and lockdown in Mar’20 took a toll on NCL’s Q4 performance; its revenue/EBITDA/PAT declined 9 per cent/59 per cent/71 per cent. On good demand, however, volume recovery is expected to be rapid. The WHRS expansion continues to be delayed, and the Chinese JV may be in trouble in the present circumstances. The proposed (Vishakhapatnam) expansion and (Mattapally) modernisation will keep debt high.

Investment Rationale


The brokerage expects cement volumes to dip 3 per cent in FY21 and grow 8 per cent in FY22, and EBITDA/ton to come at Rs 629/707 in FY21/22. It maintains a buy rating, at a higher target of Rs 108 based on 5 times FY22e EV/EBITDA.

Risks: Rise in input costs, extension of the lockdown.

Financials


On 12 per cent/14 per cent lower volumes in the cement/board divisions, revenue slipped 13 per cent/17 per cent year on year in Q4. RMC revenue dipped 8 per cent year on year. Further, on EBITDA falling 59 per cent year on year to Rs 225 million, (cement) EBITDA/ton dropped 51 per cent year on year to Rs 410 (vs. Rs 835 a year ago and Rs 353 the prior quarter) whereas the PBIT margin of the boards division dipped 459bps to 13.9 per cent.

Promoter/FII Holdings

Promoters held 42.33 per cent stake in the company as of March 31, 2020, while FIIs held 2.28 per cent, DIIs 7.53 and public and others 47.86 per cent.