ICICI Direct has given Hold recommendation for NCL Industries with a target price of Rs. 240 in its research report issued on Jul 01, 2021

ICICI Direct’s research report on NCL Industries

NCL Industries’ FY21 performance improved sharply with the company reporting revenue growth of 47.5% YoY to Rs 1383.7 crore along with EBITDA margin expansion of over 556 bps to 20.4% and PAT of over Rs 148.8 crore despite pandemic woes. Significant volume catch-up from Q2FY21 onwards supported by firm realisations helped NCL to post a healthy performance. Although Q4FY21 margins remained lower at 16.4%, this was partly led by cost pressures (higher petcoke, fuel prices) and the change in sales mix (increase in non-retail share) due to pick-up in infra that led to 2% QoQ drop in realisations. Going ahead, commissioning of WHRS (8 MW) and improved pricing environment would provide a cushion against the rise in cost of production. The WHRS, which got commissioned, would likely bring cost savings of over Rs 25 crore on a full year basis. Further, the company has planned a capex of Rs 300 crore though which NCL would increase its cement capacity to 3.6 MT from 2.7 MT by FY23E. Overall, we continue to remain positive on the sector.


Further, we await further clarity on the growth prospects of its door business division. With a positive sector outlook, we change our rating on the stock from REDUCE to HOLD with a revised TP of Rs 240/share (at 6.5x FY23E EPS, implied EV/tonne of $75/tonne, earlier TP Rs 120).