Apcotex Industries – monopoly in Synthetic Rubber?

Q2 2024 Concall Notes

• Excellent volume growth, but fall in raw material price was the key reason behind the low finished goods realization. No substantial inventory loss in the quarter.

  • Recent raw material price in second half of the quarter has negated some inventory loss (observed till Mid July) – so no material inventory loss in the quarter
  • Sequential volume growth: 5%, overall growth is close to 5% QoQ and this is not just from nitrile latex growth. No volume guidance provided from management, but like to utilize the full capacity max by 3 years.
  • Export growth for Apcotex due to cost being too high for European competitors & manufacturers looking to diversify out of China

• New facilities commissioned are utilized close to 25% – 30% on yearly basis. When capacities are fully utilized for newly commissioned plants, it will generate close to 600 – 700 crore.

  • Received clearance to operate the multi-purpose Taloja facility at full capacity, at end of Q2.

• Revenue mix:

  • 70 : 30 in both volume & value terms vs 80 : 20. Exports are more towards carpets, XNB
  • End user industry mix: Latex – 55% and Rubber – 45%

• Nitrile Latex & new plant commissioned for it:

  • Top Glove (leading glow manufacturer) – Expects the prices of Nitrile latex to drop further, but management doesn’t see much room for further price drop.
  • At the moment Nitrile latex EBITDA is just close to break-even @ close to 0% and it is dragging the overall EBITDA. But EBITDA pre covid was around 14 – 15% or even more than that. But some of the current Orders are below the break-even levels, where we like to operate at least at or above break-even levels
  • Current capacity utilization is around 25 – 30%, hopefully will be able to utilize at least 90% capacity by End of the year at monthly run rate.
  • Exploring smaller Vietnam | Thailand | Sri Lanka and some new players in India, other than earlier preferred market like Malaysia

• Capex: No decisions made yet, For NBR related capex – Design is ready but waiting for EV related developments, as NBR has major application towards ICE vehicles, very much less quantity of NBR will be going towards EV vs ICE. As of now no major capex other than maintenance capex.

Note: These are some personal notes from Q2 FY 24 conference call, as per my understanding