Apcotex Industries is a small cap with a mcap of 750 cr. They are mainly involved in the manufacture of performance emulsion polymers which are mainly used in the automotive industry(v-belts, conveyor belts, hoses) ,the footwear industry ,and in gloves etc . The balance sheet looks healthy. The valuation is a bit rich at the moment with a PE of 32. Looking at the other numbers.
- The margins have been improving over the years
- Good cash flow
- ROE and ROCE of 20 plus
- The debt halved in 2016 and now the debt to equity stands at 0.26
The sales though have not grown much in the last 5 years. But that could possibly change after the recent acquisition of Omnova Solutions and now they have a monopoly position in Synthetic Rubber . I think they are the only manufacturer of Nitrile Latex in India.
Now looking at the future of Synthetic rubber in India. Though India is the 4th largest producer of natural rubber , India is still deficient in Synthetic rubber production.
Synthetic rubber has a few advantages over natural rubber other than being cheaper.It has greater resistance to abrasion, wear and water, better wet grip,more resistant to oil, certain chemicals and oxygen ,resilience over a wider temperature range and better ageing.
Synthetic rubber Opportunity in India
-2.5 billion square meters of roads will have to be paved, 20 times the capacity added in the past decade -per capital income increasing and thus more demand for auto mobiles
-Growing auto mobile and Tyre industry
- The Tyre industry in India has strong domestic manufacturing capabilities and with the fluctuating natural rubber prices , the usage of synthetic rubber is increasing.
Currently India relies heavily on import of Synthetic rubber. So companies like Apcotex industries stand to benefit.
The promoter is the Choksey family. Atul Champaklal Choksey was earlier also a promoter of Asian Paints i think.
Top public shareholders include Vijay Kedia
Quarterly results came out on Friday and the income from operations was down to 43 cr compared to 60 cr in the prev quarter. This might have been because of the close down of Taloja plant in June for maintenance
Disclosure : Invested.