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There has been a strong tire replacement demand in domestic market as economic revival has started taking pace. Tyre demand is robust in US & Euro region which will support exports, whereas overall demand is expected to grow by 7% in FY23, as per Axis Securities.

Sharing as its top stock pick, domestic brokerage and research firm Axis Securities said it has maintained its Buy rating on Nocil shares with a target price of 283 apiece. The chemical stock has risen more than 11% in 2022 (YTD) so far.

“NOCIL has capacity of 110,000 MT, currently it operated at 75% capacity utilization. With the strong demand and product uptake the Company is confident of achieving peak utilization by September 2023. The topline is expected to grow at around 25% compound annual growth rate (CAGR) over next 2 years," the note stated.

Many global and domestic tyre majors are looking to reduce their dependence on China and look to tap alternate supply chain partners in India. 

“India, being a relatively smaller player in the rubber chemical industry with NOCIL having a dominant share in the Indian rubber chemical industry, the strategic shift will bode well for NOCIL’s growth over the longer term. Currently, China is the global supplier of rubber chemicals catering to 75% of requirements," Axis Securities added.

The brokerage house expects the company’s ROE to increase from 7% to 17% over FY21-24E, driven by a strong 54% PAT CAGR over the same period as it continues to maintain market share and captures on strong replacement demand.

NOCIL Ltd., incorporated in 1961, is engaged in the manufacture of rubber chemicals which are used by the tyre industry and other rubber processing industries. Rubber Chemicals which further include Antidegradants or Antioxidants, Accelerators and products for non-automobile industry like products.

NOCIL also manufactures prevulcanisation inhibitors and post-vulcanisation stabilizers. & is market leader of rubber chemicals in India with around 40% market share and an established clientele

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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