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Apcotex Industries Limited |NSE:AIL| Research Summary

Apcotex Industries Limited (AIL) is one of the leading manufacturers of Synthetic Rubber and Synthetic Latex (Nitrile, VPlatex, XSB and Acrylic Latex) in India. It was started as a division of Asian Paints in 1980 to manufacture vinyl pyridine latex and carboxylated styrene butadiene latex in India..

It has transformed itself into a specialist producer of synthetic latex and rubber and is one of the few companies to produce the widest range of emulsion polymers. The company’s synthetic rubber is used in a wide range of products such as automotive components, hoses, seals, printing and industrial cylinders, friction materials, belts and footwear.

The Apcotex Latex range is used for paper/cardboard coating, carpet backing, tire cord dipping, construction, glove examination, surgical and industrial applications etc. Apart from having a diverse clientele. It is present in various industries, which protects against any slowdown in a single industry.

Its manufacturing facilities are strategically located on the west coast of India. The company has two manufacturing facilities – one each at Taloja in Maharashtra and Valia in Gujarat. AIL manufactures synthetic latex and high styrene rubber from the Taloja plant and nitrile rubber and its allied products from the Valia plant.

Over the past few years, Apcotex has built a strong R&D base that has enabled it to develop, manufacture and export products and compete with global players. The company has one of the widest product lines of emulsion polymers in India and caters to a wide range of industries. The main raw materials are petrochemical products and its business is sensitive to the high volatility of the prices of oil and its downstream products.

About 70% of Nitrile Butadiene Rubber (NBR) is imported into India, creating good potential for Indian Nitrile Rubber manufacturers. The long-term growth of this segment can be attributed to the increasing demand for NBR across automotive, industrial and agricultural applications.

A strong management team, extensive experience in the business, long relationships with clientele and investment in research and development are some of the key positives that the company has borne fruit in relation to its competitors and new entrants.

During the quarter, the company posted its highest quarterly revenue ever. Revenues for the quarter grew by 65.5% YoY and 10.5% QoQ to 306 cr. The company reported an EBITDA of 48.5 cr and an EBITDA margin of 15.9%.

PAT grew by 48.5% year-on-year to 33.6 cr. PBT increased by 61.5% year-on-year to 45.3 cr. The company saw a 32% increase in volume in the quarter. The company performed well in the quarter. Of the 48% growth reported by the company, Close to 24% came from higher volume, while the rest was from better executions.

The company said that the increase in RM and other costs may be passed on to its customers to some extent with a 3-6 month delay. The company faces little pressure from RM cost inflation, forcing it to maintain high inventories, increased receivables due to high transportation costs, and supply chain irregularities. This led to an increase in working capital requirement.

Successful capex operationalization and the company’s ability to increase the share of new products in its revenue pie will drive growth over the next 2-3 years. For the next two years, capital expenditures on nitrile latex and new product launches will drive growth. At the peak, the additional capacity can generate revenues of Rs 600 cr, which is expected in FY25.

Apcotex recorded total sales of Rs 957 cr during FY22 compared to Rs 541 cr in the previous financial year. The company exported its products worth 202.8 cr during FY22, around 21% of the total revenue.

The company remains optimistic about its prospects with all the moves made in the last 2 years. Business across most of its product segments was strong in FY22 and is expected to continue. Sales of the new Nitrile Latex product range for the glove industry rose rapidly during the financial year.

The company will continue to look for opportunities in new adjacent products as well as opportunities for inorganic growth. Management continues to invest in research and development to develop new products, explore new applications and understand changing customer needs.

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