Hold NOCIL; target of Rs 140: Prabhudas Lilladher

Moneycontrol • 2 days ago

Original source

Key Investment Pillars

  • Higher realizations driven by anti-dumping duty on sulfonamides and improved product mix are expected to support revenue growth.
  • Management's guidance of FY27 revenue of INR14-16bn and EBITDA margin of ~10% provides a positive outlook.
  • The INR1.3bn Dahej expansion and TDQ project are progressing as planned, with potential for future growth.
  • However, higher coal, gas, and freight costs, as well as import competition and potential demand moderation, pose risks to the thesis.

Thesis Validation Checklist

  • Investors should watch for signs of volume recovery in H2FY27, driven by the easing of supply-side constraints and logistical disruptions.
  • Margin expansion, driven by higher realizations and improved operating efficiency, will be crucial in achieving the guided EBITDA margin of ~10%.
  • Progress on the Dahej expansion and TDQ project, as well as customer approvals, will be important indicators of future growth potential.
  • The company's ability to navigate challenges such as higher input costs, import competition, and demand moderation will be key to sustaining the investment thesis.