Apcotex 1QFY20: Slowdown evident from revenue growth, positive surprise in margins

By Abhishek Salunke Uncategorized 0 Comments

Dated: 29th July 2019

Result Update

Apcotex reported a YoY decline of 2% in the revenues at Rs 1,467 mn. The Gross Margins (Revenues minus cost of goods sold) were reported at 33.4% for 1QFY20, a YoY improvement of 330 bps from 30.1% in 1QFY19.
Despite the sharp jump in gross margins, EBITDA margins improved by a muted 40 bps YoY to 12.3% as compared to 11.9% in 1QFY19. This is due to a sharp increase in other expenses by 16% YoY to Rs 211 mn. The absolute EBITDA for the quarter was reported at Rs 181 mn, a meagre 1% YoY increase from Rs 179 mn in 1QFY19.
The PAT for the quarter grew YoY 1% at Rs 114 million as compared to Rs 112 mn in 1QFY19.

Conference Call highlights:

Mark to Market (MTM) losses for the quarter have been reported in Other Comprehensive Income (OCI) instead of Operating Income (OI). Total MTM loss for the quarter was reported at Rs 6.9 mn as compared to Rs 0.74 mn in 1QFY19.
The company has spent Rs 600 mn of the planned Rs 900 mn of CapEx till 1QFY20. Remaining Rs 300 mn will be spent in the next 3 quarters of FY20E. The company incurs maintenance CapEx of Rs 60-70 mn every year.
The auto ancillary business contributed 30% whereas the contribution from construction business for the quarter was in the range of 12-14%. Both the industries are facing slowdown and the company expects the slowdown to remain in the economy in the coming quarters as well.
The debottlenecking of Nitrile Butadiene Rubber (NBR) plant is expected to be operational by January 20E. 80% of the work is complete and the company is in the final stages of completion of the debottlenecking plan.
The launch of the solar power plant expansion project is further delayed until October 2019. The initial deadline was July 2019. The company is facing some issues regarding civil construction and environmental problems. The management was confident in launching the power plant before the new deadline.

Consensus Estimate (Source: Reuters website)

The closing price of Apcotex is Rs 188/- on 29-Jul-19. It traded at 18x / 15x the consensus EPS for FY 20E / FY 21E EPS of Rs 10.6 / 12.8 respectively.