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Pricing pressure continues to hurt performance

* NOCIL's EBITDA/kg missed our estimate and stood at INR18.5 in 3QFY25, down 52% YoY. Sales volume increased 3% YoY to 12.9tmt. Realization was down at INR247.4/kg (-10% YoY) due to reduced selling prices, in line with the fall in RM prices. Hence, EBITDA was INR238m (-50% YoY), while PAT stood at INR185m (- 38% YoY). Volumes, too, declined sequentially.

* Demand is expected to improve next month, but pressure will persist due to competition from China, Korea, and the EU, impacting prices and volumes. While tyre demand remains strong in the domestic replacement market and exports, OEM demand is weak. Volumes are set to recover next quarter, driving operating leverage higher.

* Volume growth of 8-10% is expected for FY25, with a similar trend likely for FY26. An anti-dumping investigation on a couple of products should conclude within the next 9-12 months. NOCIL is exploring inorganic growth and new product development; it has ~INR5.5b in cash and investments. Inquiries from the US are also rising following the new tariffs on China.

* We estimate a revenue/EBITDA/ PAT CAGR of 9%/12%/ 13% over FY24-27 (primarily due to the lower base in FY24), with NOCIL not being able to surpass its FY23 performance even in FY26. Volumes are likely to report a CAGR of 8% over FY24-27. Downside risks are more than the upside risks in NOCIL at the moment.

* Due to the underperformance in 3QFY25, we cut our revenue/ EBITDA/ EPS estimates by 7%/ 17%/ 13% for FY25, by 10%/ 13%/ 12% for FY26, and by 14%/ 12%/ 11% for FY27. There could be further earnings cuts in the ensuing quarters. The stock is trading at ~29x FY26E EPS of INR7.6 and ~20x FY26E EV/EBITDA. Our TP of INR210 is premised on 20x Dec’26E EPS. Reiterate Neutral.

Miss across the board; EBITDAM dips for the fourth straight quarter

* Revenue came in at INR3.2b (est. of INR3.5b, -7% YoY). Gross margin was 44.4% (vs. 46.3% in 3QFY24).

* EBITDA stood at INR238m (est. of INR351m, -50% YoY). EBITDAM was 7.5% (vs. 14% in 3QFY24).PAT was INR185m (est. of INR239m, -38% YoY).

* For 9MFY25, NOCIL’s revenue was INR10.5b (-3% YoY), EBITDA stood at INR1b (-31% YoY), and PAT was INR872m (-3% YoY). EBITDAM stood at 9.6% (-390bp YoY).

Valuation and view

* NOCIL is expanding its capacities (20% of the current capacity of 110ktpa) in anticipation of a demand uptrend in the near term. The new capacity is expected to come online by Sep’26. The top three global players are also expanding their capacities. The pickup in China’s domestic consumption is expected to play a key role in easing pricing pressure for NOCIL, though we do not anticipate this to happen in the near term. There is currently no timeline for the optimum utilization of its existing facilities.

* NOCIL currently trades at a premium of ~41% to its long-term average of 19.3x on a one-year forward P/E basis. The stock is also trading at ~29x FY26E EPS of INR7.6 and ~20x FY26E EV/EBITDA. Our TP of INR210 is premised on 20x Dec’26E EPS. Reiterate Neutral.

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