Apcotex Industries – monopoly in Synthetic Rubber?

Q1FY25 Concall Summary

Business Updates

Volume growth was 14% on a yoy basis in Q1FY25

Participants

Smart Sync Services

SIMPL

MV Investments

iThought PMS

AMSEC

SMIFS

QnA

• The initial years post covid had higher demand because of a pull from the market but from a volume perspective even last year had good growth
• The EBITDA per ton for Q1 is better not just sequentially but also from a yearly perspective
• The margins for the business have a potential to touch 14-16% and as volumes ramp up that is where the direction would be
• In the gloves business currently at 50% utilization due to the margins being lower. The project is zero EBITDA as of now
• There is sequential improvement in this industry as prices of gloves have started to go up and customers who are glove manufacturers have started to turn a profit
• Since a lot of capacities got added on both gloves and nitrile latex the utilisations still continue to remain very low
• The company has grown volumes at 40-45% over the last 18 months
• A few nitrile latex manufacturers have announced closure of the older plants but this is not true for the newer plants
• While earlier price of freight was a challenge but since last months the availability of containers too have become a challenge
• The latex that is made for paper has seen margins come off because both BASF and the company has added capacity. Also margins in NBR have been at historical lows due to the slowdown in China
• Over the next five years looking at the company evolving to an EBITDA margin range of 13-17%
• Not clear on the NBR capex for now and looking at other opportunities considering the lower margins in that segment. However more than 70% of NBR is imported but until the pricing makes sense will not go ahead
• China still continues to be a net importer for nitrile latex
• The capex will largely be around maintenance capex. There is also plan to build a new R&D building and this seems to be a great time to invest behind research with a new R&D chief

There will be another capex for styrene butadiene latex because by this year the capacity will mostly get exhausted