Apcotex Industri

Apcotex Industries reported a strong Q1 FY26, with operating revenue reaching ₹376 crores, marking a 12% year-on-year growth. Operating EBITDA increased by a robust 22% year-on-year to ₹39 crores, leading to an improved EBITDA margin of 10.3%, up from 9.45% in Q1 FY25. Profit After Tax (PAT) for the quarter stood at ₹19 crores, with a PAT margin of 5.11%. This performance was primarily driven by the highest ever quarterly sales volumes, which grew by 25% year-on-year.

Exports were a significant growth driver in Q1 FY26, with export revenues increasing by 37% year-on-year in rupee terms. Exports now contribute a substantial 37% to the company's overall revenue, marking the highest ever contribution. Management aims for exports to reach 40-45% of total revenue by next year, targeting a total revenue of ₹1,600-1,700 crores within three years. This strategy diversifies revenue streams beyond the domestic market, which has historically been the primary focus.

Despite high capacity utilization of approximately 90% in the Nitrile Latex plant in Valia, margins for this segment remain low due to industry-wide overcapacity. While the company has achieved consistent sales volume growth for six consecutive quarters and benefited from operating leverage, the overall market conditions prevent significant margin expansion. Management noted that without the Nitrile Latex segment, overall margins would be a couple of percentage points higher, and they are targeting Nitrile Latex margins to improve to the mid-teens or early-teens in the long term.

Apcotex is planning de-bottlenecking and expansion projects, which will be announced shortly once details are finalized. These projects will focus on latex, SBR latex, styrene acrylics, and NBR, aiming to increase capacity utilization further. The company expects to have sufficient capacity for the current and part of the next financial year. Funding for future CAPEX is expected to be a combination of debt and internal accruals, with the current debt-equity ratio at 0.3, which is expected to increase only slightly.

The environment remains uncertain due to tariffs and geopolitical tensions, impacting trade flows and raw material prices. The company noted that US tariffs on Chinese gloves have upended the glove supply chain, leading to increased competition in non-US markets. Raw material prices, particularly for butadiene and acrylonitrile, are volatile and difficult to predict. The domestic paper and construction markets are also experiencing a slowdown, affecting demand for certain products.

Apcotex has invested approximately ₹3.5-4 crores in a wind power SPV in Gujarat. This initiative is primarily driven by the company's commitment to ESG principles, aiming to reduce its carbon footprint by sourcing more power from renewable sources. While commercially viable with a good IRR, this investment is not expected to significantly impact the company's total EBITDA. Plans for similar investments in Maharashtra were affected by recent rule changes.

The NBR market in India faces significant competition from imports, with 70% of the product currently sourced from outside the country. This is largely attributed to dumping practices, leading Apcotex to actively pursue an anti-dumping case. Management highlighted that countries like China have imposed anti-dumping duties on NBR imports from Korea, indicating a similar issue in other markets. The resolution of this anti-dumping case is crucial for improving domestic NBR market conditions.

The ApcoBuild segment experienced a challenging Q1, with muted growth, reflecting the broader slowdown in the Indian construction market. Management acknowledged the difficulties but expressed optimism about returning to a positive growth pattern by the end of the year, expecting good annual numbers. The company is also implementing internal manpower changes to support this segment's growth.