Apcotex Industries Limited

Apcotex Industries reported a robust Q3 FY26 with operating EBITDA increasing 61% YoY to ₹44 crores, and PAT growing 91% YoY to ₹22 crores. This led to an EBITDA margin of 13.12% and a PAT margin of 6.7%. Despite a 7% YoY decline in operating revenue to ₹332 crores, attributed to falling raw material and finished goods prices, total volumes grew 10% YoY. For the nine-month period, the company achieved its highest ever sales volumes (+15% YoY) and export volumes (+21% YoY), with operating revenue broadly stable at ₹1,044 crores. 9M operating EBITDA rose 42% YoY to ₹123 crores, and PAT increased 79% YoY to ₹67 crores.

The significant improvement in Q3 EBITDA was driven by higher volumes, improved margins, and enhanced operational efficiency. Management highlighted successful strategies in holding prices and leveraging drops in raw material costs. The company's EBITDA margin expanded to 13.12% in Q3, and management believes there is still leeway for further improvement, with sustainable margins potentially in the 12-16% range, up from previous guidance of 12-13%.

The Director General of Trade Remedies (DGTR) recommended anti-dumping duty on NBR, but the Finance Ministry has not yet issued the notification, causing a delay. Despite this uncertainty, Apcotex is proceeding with its NBR expansion plans, having found an innovative way to expand capacity by 80-90% with a significantly lower CAPEX of ₹130-140 crores, compared to the initially envisaged ₹200-250 crores. This revised plan is supported by current ROCE and margins.

Apcotex reported high capacity utilization across its product lines: NBR at 100% for the whole year, nitrile latex at 70-75% YTD (with expectations of full utilization next year), and other products (construction, carpet, paper, textiles) at 85-87%. The US duty on Chinese gloves, imposed from January 26, has positively impacted the company's customers in Southeast Asia, contributing to higher nitrile latex utilization. However, global overcapacity in nitrile latex, particularly from China, remains a concern, though margins have recently improved.

The company has commenced implementation of all previously sanctioned projects totaling ₹210 crores. A new ₹3.5 crore investment in wind energy is expected to yield credits starting early next year. The Valia expansion project is on track for completion by March-April 2027 and is now projected to add a substantial ₹550-600 crores to the top line, a significant increase from the earlier estimate of ₹200 crores. New projects will be funded through a mix of internal accruals and debt.

Apcotex reduced its debt by approximately ₹94 crores during the nine-month period and remains net cash positive as of December 31, 2025. The company's interest cost decreased significantly in Q3, primarily due to debt repayment (75% of reduction) and lower interest rates (25%). An interim dividend of ₹2.50 per equity share was approved, underscoring the company's commitment to shareholder returns. Management noted that while they are currently debt-free with excess cash, new project funding might lead to an increase in interest costs next year.

Raw material price volatility, particularly for petrochemicals like styrene and acrylonitrile, is an ongoing challenge. While short-term supply hitches can occur (e.g., due to plant shutdowns), long-term supply is generally stable through imports. The company manages this volatility by adjusting product prices, passing on cost increases, or absorbing reductions. Rising raw material prices are expected to increase working capital utilization in the next 3-4 months.

Management reiterated its strategy of focusing on volume-led growth, margin expansion, and operational efficiency. The ApcoBuild business, while a small part of the overall portfolio, continues to perform adequately despite increased competition in the construction chemical segment. The company leverages its backward integration into polymers for ApcoBuild, contributing to healthy bottom-line margins. There are no immediate plans for large investments in ApcoBuild or forward integration into glove manufacturing due to current market conditions and strategic priorities.