Thursday, 8 December 2016

NCL INDUSTRIES LTD - Cement, Pre-Fab Low Cost Housing


MCAP: 400 Odd Crores.
CMP: Around 118/-
CURRENT P/E: Around 8.

NEGATIVE: 82.94% Promoter Holding pledged.
POSITIVE: Sectoral bullishness

NCL Industries Ltd is a cement company from the state of Telangana.
NCL is also having a Prefab Houses segment.
NCL is also into Ready Mixed Concrete, Cement Bonded Particle Board & Hydropower.

Demonetization has been the buzzword since last month.
With Demonetization and the hard push on taxation the government is expected to get richer so there are obvious expectations that going forward from here there is going to be huge spending on Infra, Railways, Solar Energy, Housing For All from the Government.

NCL's core business is of Cement which is expected to do well with increased spending on Infra (roads,highways etc) and we have Prefab Housing segment, This segment is very important right now.

PreFab housing is used by many state govts. to realize the dream of Housing for All.
Apart from housing for all, the sector will witness huge demand as the country needs high number of cabins for toilets to improve sanitation and with the plans of cashless economy we need to increase the number of ATMs and very soon we are going to have Aadhar Micro ATMs. All this would require pre-fab cabins and structures.

There are select stocks available in this sector like, Sahyadri Industries, Richa Industries but I feel NCL is a safer bet because of a good brand of cement under its kitty. (Nagarjuna Cement).

Take a look at their pre fab site:

Technically 110-109 looks like a strong support, if broken stock can correct otherwise there are chances of a good recovery and rally in this stock.

Note: The above is not a research report but information as available on public domain and it should not be treated as a research report.

Registration status with SEBI: I am not registered with SEBI under the (Research Analyst) regulations 2014 and as per clarifications provided by SEBI: “Any person who makes recommendation or offers an opinion concerning securities or public offers only through public media is not required to obtain registration as research analyst under RA Regulations”

Disclosure: It is safe to assume that i might have NCL Industries LTD in my portfolio and hence my point of view can be biased. Readers should consult their financial advisory before any investments.


  1. Ace, 82% shares are pledged by promoters. Any idea why and if they will get released soon? What is the risk for investor here with this pledging?

  2. dear ace,
    while going thro the latest p&l , b.s and segment revenue report, it sdhows there is no revenue generation from prefab you foresee it a big booster going forward?
    (yours is a forward looking report?) pl advise and correct me if i am wrong.

  3. Tried to calculate EV PER TONNE IN DOLLARS TERM----
    414+201-20= 595 cr
    Capacity - 0.27 cr
    EV\tonne ($) = 32.89$
    Currently any company would require 120$ to setup a new Cement plant

  4. This was a forward looking update on NCL.

  5. Akash:
    :P. But anyways, I personally just had a call with investor relations team of NOCIL few mins back. Chatted for around 20 mins. Here are a few takeaways:
    1) Company just announced 170 Cr capex 3 days back, but the planning for the same started around 6 months back. Management was waiting for a suitable time with optimum market conditions before going for the expansion. They think coming years are going to be good for them.
    2) Amongst Indian companies NOCIL (rubber chemicals company; major client tyre companies) has a share of 90% in the domestic market - clear leader, preferred supplier with some MOAT one may say.
    3) If we consider imports as well, then NOCIL share is around 50% and this may spike given the fact that govt of India is mulling over anti-dumping duty on tyres and rubber chemicals and Company said there are some informal +ve developments on that front
    4) USA just announced takeback of anti-dumping duty on chinese tyres some days back. Hence instead of flooding Indian market, these tyres will go to US, benefiting tyre companies, and NOCIL
    5) The 170 Cr expansion is from internal accruals only and they mentioned over call that this should give an annual revenue of around 350 Cr (from Q2, FY19 onwards). Considering ROCE of ~20% on conservative side, it should add 70 Cr to bottomline, which is ~60% increase in profits!!
    6) Company managed to increase ROCE from 12 to 24% in last 3 years. I asked whether it was raw materials. They said no - mainly due to internal process efficiency measures and secondly product mix change of specialty products from 35% share to 45% share, target being 50% in coming quarters.
    7) Environmental concerns are forcing Chinese majors to invest in environmental technologies and stuff. This will lead to price increase of imports from China, which is again +ve for Company. They mentioned that this is yet to reflect and will probably reflect in next 2 quarters. So all in all a safe and sound bet I think with an investment horizon of 2 years for story to play out. Expect decent returns with less risk. P.S. I am buying heavy! Happy investing :)