Summary:
Apcotex Industries, a leading manufacturer of synthetic rubber and latex, reported a year-over-year (YOY) decline in its earnings before interest, taxes, depreciation, and amortization (EBITDA) margin for the second quarter of the fiscal year 2024. Despite a 21% YOY increase in revenue, reaching Rs 337 crore, EBITDA margin contracted to 7.83% from 11.34% in the same period last year. This translates to an EBITDA of Rs 275 crore for Q2 FY24, compared to Rs 317 crore in Q2 FY23. The company attributes the margin compression to higher input costs and increased operating expenses.
Key Insights:
Segmental Performance: While the company hasn’t released detailed segmental performance data, it indicated positive demand trends across most of its product segments, including synthetic rubber, latex, and rubber chemicals.
Revenue Growth: Apcotex Industries achieved robust revenue growth, driven by a 14% YOY increase in sales volume and improved price realization. Exports contributed significantly, accounting for 30% of total revenue and growing by 12% YOY.
Margin Pressure: Despite the strong revenue performance, the company faced headwinds from rising input costs, particularly for raw materials like crude oil derivatives. Increased operating expenses further contributed to the decline in EBITDA margin.
Investment Implications:
Valuation: The recent decline in EBITDA margin may impact the company’s valuation in the near term. However, long-term investors should consider the company’s growth prospects and its position in the industry.
Monitor Margins: Investors should closely monitor the company’s ability to manage input costs and operating expenses in the coming quarters. Any further margin contraction could impact profitability and investor sentiment.
Growth Prospects: Apcotex Industries remains well-positioned to capitalize on the growing demand for synthetic rubber and latex in both domestic and international markets. The company’s focus on expanding its product portfolio and increasing its export footprint could drive future growth.
Sources:
BloombergQuint: https://images.assettype.com/bloombergquint/2024-07/59beb858-abf9-4579-b163-d1fd1e0780b3/Axis_Securities_Apcotex_Inds__Q1FY25_Result_Update.pdf
Livemint: https://www.livemint.com/market/market-stats/apcotex-industries-q2-results-S0004084
