Broker's Call: NCL Industries (Buy)

BL Research Bureau | Updated on: Apr 04, 2022

Anand Rathi

Target: ₹264

CMP:₹196.30

With its cement plant running at full capacity, NCL Industries is set to expand its cement, boards and panels capacities. Its Chinese joint venture for steel building products having come to an end, it is venturing into modular containers.

Coal non-availability (on power companies preferred) and high international coal prices pushed up NCL’s cement costs by ₹30-50 a bag. To pass this on, southern manufacturers hiked prices by ₹15-20 a bag in Mar’22. Management says a further hike is expected in April first week as production costs would shoot up about ₹Rs80/bag from higher costs of diesel/fuel and power. The builders’ response towards higher cement prices will be key.

The Line-I modernisation at the Mattampally GU (by 0.4m tons and of clinker by 1,500 tpd) is expected to commence in H1 FY23. The Vishakhapatnam GU expansion is likely to be delayed for want of various government approvals required. Further, the company is expanding its panels capacity at Paonta Sahib (by 250 a day) and its laminated cement particle board capacity at Hyderabad.

NCL Buildtek and NCL Industries received LoAs on bids aggregating ₹1,860 crore to supply windows and doors to APSHC. The project is expected to complete in 1.5-2 years. For this, it has subscribed to OCDs issued by NCL Buildteck, of ₹25 crore.

We expect 10 per cent and 7 per cent CAGRs over FY21-24 in respectively revenue and volumes and about ₹750-900 EBITDA/ton (vs. ₹1,123 in FY21).

Published on April 04, 2022
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