These days the industries based on usage of rubber are suffering at the hands of surging rubber prices. One can see MDs of leading Tyre manufacturers regularly appearing on business channels giving their guidance regarding further increase in tyre prices on account of escalating rubber prices. While the end users are grimacing, the latex producers are enjoying as the petrochemical prices have come down since Sep'08 and have thus been enjoying higher margins.
The natural rubber prices have shot up from Rs 65 per kg in March 2009 to Rs 130 per kg in December 2009, an increase of 100 % in a short span of nine months. Domestic rubber production has been continuously falling short of consumption leading to its poor availability even during the ongoing peak rubber season.
Keeping these factors in mind the stock that comes to my notice is Apcotex Industries. The company is one of the leading producers of polymer products namely Synthetic Latices (VP Latex, XSB latex, Nitrile Latex) and Synthetic Rubber (HSR,SBR) in India. It has one of the broadest range of products based on Styrene - Butadiene chemistry available in the market today and cater mainly to the industrial segment. Their range of synthetic latices is used among other applications, for tyre cord dipping, paper and paperboard coating, carpet backing, concrete modification/water proofing and textile finishing. The various grades of Synthetic Rubber find application in products such as footwear, automotive components, v-belts, conveyor belts and hoses.
The business of the company is highly vulnerable to volatility of crude oil and its downstream product prices, but the management of the company has been doing well to stave off any major impact from it (their margins did dip in Dec'08, but they managed well during other quarters). They succeeded in reducing their working capital requirement through better inventory and debtors management during FY2008-09.
On the cursory look there seems to be a decline in bottom-line for FY2008-09 in comparison to FY2007-08, however one needs to take notice of other income and losses to arrive at a true judgment. The operating profits before tax and after depreciation during the year FY2008-09 increased by 89.77% to Rs.6.49 crore from Rs. 3.42 crore during the previous financial year. However, the other income included loss on sale of investment at Rs.65 Lacs as compared to Rs.3.09 crore during 2007-08.
The company is quite investor friendly in the sense that they have been quite good with dividend payments. For FY2008-09 the company recommended dividend of Rs 4 (Rupees Four Only) per equity share of Rs 10/- each (@ 40%). This was at a tie when the stock price was trading at around 70 odd rupees, thus one could have accrued 5-6% from dividends alone, while the management also announced the buy-back at a maximum price of Rs 90. So, Rs 90 in effect should act as a good support level going forward.
By the time I started writing on Apcotex, the stock hit the upper circuit today and reached the level of Rs 115.80. However I still maintain that all those holding the stock should continue holding because as mentioned before the price should find really good support at Rs 90. Also, the performance for half year ending Sep'09 is quite an improvement over half year ending Sep'08, and since the Dec'08 was poor for the company there should be a further good gap up over the nine months December'09 ending results.
Also, I would like to mention here that today a bulk deal took place at Rs 115.80 for around 30k shares.
The natural rubber prices have shot up from Rs 65 per kg in March 2009 to Rs 130 per kg in December 2009, an increase of 100 % in a short span of nine months. Domestic rubber production has been continuously falling short of consumption leading to its poor availability even during the ongoing peak rubber season.
Keeping these factors in mind the stock that comes to my notice is Apcotex Industries. The company is one of the leading producers of polymer products namely Synthetic Latices (VP Latex, XSB latex, Nitrile Latex) and Synthetic Rubber (HSR,SBR) in India. It has one of the broadest range of products based on Styrene - Butadiene chemistry available in the market today and cater mainly to the industrial segment. Their range of synthetic latices is used among other applications, for tyre cord dipping, paper and paperboard coating, carpet backing, concrete modification/water proofing and textile finishing. The various grades of Synthetic Rubber find application in products such as footwear, automotive components, v-belts, conveyor belts and hoses.
The business of the company is highly vulnerable to volatility of crude oil and its downstream product prices, but the management of the company has been doing well to stave off any major impact from it (their margins did dip in Dec'08, but they managed well during other quarters). They succeeded in reducing their working capital requirement through better inventory and debtors management during FY2008-09.
On the cursory look there seems to be a decline in bottom-line for FY2008-09 in comparison to FY2007-08, however one needs to take notice of other income and losses to arrive at a true judgment. The operating profits before tax and after depreciation during the year FY2008-09 increased by 89.77% to Rs.6.49 crore from Rs. 3.42 crore during the previous financial year. However, the other income included loss on sale of investment at Rs.65 Lacs as compared to Rs.3.09 crore during 2007-08.
The company is quite investor friendly in the sense that they have been quite good with dividend payments. For FY2008-09 the company recommended dividend of Rs 4 (Rupees Four Only) per equity share of Rs 10/- each (@ 40%). This was at a tie when the stock price was trading at around 70 odd rupees, thus one could have accrued 5-6% from dividends alone, while the management also announced the buy-back at a maximum price of Rs 90. So, Rs 90 in effect should act as a good support level going forward.
By the time I started writing on Apcotex, the stock hit the upper circuit today and reached the level of Rs 115.80. However I still maintain that all those holding the stock should continue holding because as mentioned before the price should find really good support at Rs 90. Also, the performance for half year ending Sep'09 is quite an improvement over half year ending Sep'08, and since the Dec'08 was poor for the company there should be a further good gap up over the nine months December'09 ending results.
Also, I would like to mention here that today a bulk deal took place at Rs 115.80 for around 30k shares.
Note: The stocks discussed at MPS thru blog postings are neither a part of “Business Insights” issue nor a “Penny Stocks” which we reco/publish for paid subscribers. These are just stock specific views by MPS team; one MUST do the due diligence before doing any investment based on our reco.
To contact the Lead associate on this story: Ekansh Mittal in Noida (New Delhi) at Ekansh@hbjcapital.com
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