Buy Apcotex Industries Ltd For Target Rs. 380 - Axis Securities Ltd
Est. Vs. Actual for Q4FY25: Revenue: MISS; EBITDA: BEAT; PAT: BEAT
Change in Estimates post Q4FY25
FY26E/FY27E: Revenue: -4%/-2%; EBITDA: 4%/2%; PAT: 3%/1%
Recommendation Rationale
Strong Volume Growth Drives Margin Recovery : The company recorded a robust 15% YoY increase in volumes during the quarter, resulting in revenue of Rs 349 Cr. Improved capacity utilisation and higher volumes led to a 23% YoY rise in EBITDA. EBITDA margins expanded to 11%, driven by increased volumes, improvement in Nitrile Latex margins, and favourable crude prices during the first two months of the quarter.
Sustained Export Growth: The company maintained its strong export performance this quarter, reporting a 22% YoY rise in export volumes and a 24% YoY increase in export revenue, which accounted for 33% of total sales. Management anticipates the export contribution to overall revenue to rise to approximately 40–45% over the next few years.
Capacity Utilisation to Peak: The management highlighted that capacity utilisation is rising and may soon reach peak levels, potentially leading to further enhancement in margins. However, the company has not finalised any plans around capacity additions, as it is currently focused on optimising existing operations and may consider expansion once global uncertainties subside.
Sector Outlook: Neutral
Outlook & Guidance: The company posted robust volumes during the quarter and expects utilisation levels to pick up going forward. Management indicated that the company may run out of capacity over the next one and a half years, with a decision on capacity expansion likely over the next few quarters. While margins improved during the quarter, this was partially supported by higher crude prices in January and February. The decline in crude prices since March may weigh on profitability in Q1FY26, though it remains structurally beneficial for the business over the long term. Looking ahead, the company will focus on enhancing profitability through operational efficiencies as capacity utilisation improves, while staying cautious amid uncertainties related to US tariffs.
Current Valuation: 15x FY27E (Unchanges)
Current TP: Rs 380 (Unchanged)
Recommendation: We maintain our BUY rating on the stock.
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SEBI Registration number is INZ000161633
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