Dolly Khanna buys more of NOCIL Ltd
In my last piece (Dolly Khanna’s Fav Spec Chem Stock Has Mega Upside: Experts), I referred to the aggressive and no-holds-barred manner in which Dolly has been buying NOCIL. She quintupled her holding in NOCIL in about 18 months.
The astonishing part is that Dolly is still not satiated. She has added even more shares in the March 2017 quarter as one can see.
|Quarter ended||Nos of shares|
Dolly’s holding of 33,54,046 shares in NOCIL is worth Rs. 32.53 crore at the CMP of Rs. 97.
Ashish Kacholia makes even more aggressive foray in buying NOCIL
Ashish Kacholia has suddenly emerged out of nowhere with 46,12,929 shares of NOCIL glittering in his portfolio as of 31st March 2017.
His investment is worth Rs. 44.75 crore at the CMP of Rs. 97.
Both stalwarts have tasted success in specialty chemicals stocks
We are already aware that Rajiv Khanna, Dolly’s illustrious alter ego, is a Chemical engineer from IIT Madras and that he knows specialty chemical stocks like the back of his hand.
It is for this reason that Dolly has packed her portfolio with several top-quality specialty chemical stocks like Thirmulai Chemicals, Dai-Ichi Karkaria, Meghmani Organics etc.
Ashish Kacholia lacks the formal expertise in specialty chemical stocks that Dolly and Rajiv Khanna have. However, his wizardry in stocks alerted him that these stocks will do well and he has earlier bought top-quality stocks like Navin Flourine, GHCL etc for his portfolio.
Needless to say, the specialty chemical stocks owned respectively by Dolly Khanna and Ashish Kacholia are all glittering multibaggers today.
Why are Dolly Khanna and Ashish Kacholia attracted to NOCIL?
In my earlier piece, I have drawn attention to the research reports of eminent experts like DD Sharma, Stock Axis, Avinash Gorakshakar, HDFC Securities, etc which have explained with clarity as to why the Company is on the path of rapid growth and profitability.
I have also drawn attention to an investors’ presentation issued by the Company which explains the growth plans and the modalities.
Now, the wizards of ICICI-Direct are also impressed by NOCIL’s prospects and have issued a management note.
The important excerpts of the said note are as follows:
“Industry leader well poised for growth.. .
We recently met P Srinivasan, the Chief Financial Officer (CFO) of Nocil Ltd (Nocil) to get an insight into the global rubber chemicals industry and the company’s role in the value chain. Nocil, an Arvind Mafatlal Group enterprise, is India’s largest rubber chemicals manufacturer with a rich heritage spanning over four decades. It is an approved vendor at most domestic and global tyre manufacturers. Its wide product range, global presence and technical know-how make it the most strategic alternative to its Chinese counterparts. It follows an integrated approach wherein it manufactures intermediates as well as a wide range of final products across two manufacturing facilities in Navi Mumbai and Dahej with an installed capacity of 53000 tonne. As of FY15, it commands a market share of ~5.6% of the global and ~42% of the domestic rubber chemical industry, pegged at ~9.45 lakh tonne and ~65000 tonne, respectively. Citing capacity constraints (operating in 90%+ capacity utilisation levels) and robust demand for its product offerings, Nocil is undertaking a major expansion with an estimated capital expenditure of Rs 170 crore (funded through internal accruals) and expected commissioning by H2FY19E. In FY16, sales were at Rs 715.2 crore, EBITDA at Rs 139.4 crore (EBITDA margins 19.5%) and PAT at Rs 78.3 crore. However, the company is susceptible to realisation risk amid volatile crude prices.
Impressive growth, envisaged capex lift prospects for FY16-19E
Nocil has delivered an impressive turnaround post the commissioning of the Dahej facility in FY13. During FY12-16, sales, EBITDA and PAT have grown at a CAGR of 10.3%, 39.4% and 22.7%, respectively. Improved process efficiencies, change in product mix and continuous R&D efforts at its Dahej facility have been a game changer. Sensing capacity constraints with utilisation levels in excess of 90%, the management has proactively embarked upon an impressive ~Rs 170 crore capex programme. It is expected to be commissioned by H2FY19E with a revenue potential of ~Rs 300 crore at peak utilisation and intended RoCE of 20%+ thereby strengthening the prospects for FY17-22E.
Healthy balance sheet, robust cash flows, return ratios!
Robust growth in EBITDA margins from 7.6% in FY12 to 19.5% in FY16 and improved working capital cycle have led to strong return ratios with FY16 RoE and RoIC at 16.7% and 28.4%, respectively. The improved performance has helped the company to generate a CFO of Rs 170 crore in FY16 (Rs 44 crore in FY14). This has largely resulted in a substantial debt reduction with debt declining from Rs 152 crore as of FY14 to Rs 25 crore in FY16 with consequent debt-equity at 0.1x (FY16). At the CMP of Rs 95, Nocil trades at 13.0x P/E (TTM basis) and 10.0x EV/EBITDA (TTM basis).”
Expansion plan of NOCIL
NOCIL has announced expansion of capacities of rubber chemicals and their intermediates at the Navi Mumbai and Dahej plants. The company will invest Rs. 170 crore largely through internal accruals. The project is expected to be completed by the end of September 2018. This implies that we can expect more sales and more profits to gush into the coffers of the Company.
It is quite clear from the reports of ICICI-Direct and the other experts that NOCIL is well poised to fill the portfolios of Dolly Khanna and Ashish Kacholia with mega gains in the foreseeable future!