Apcotex Industries
Will the tables turn?
Apcotex is a leading producer of Synthetic Rubber (Nitrile Rubber, High Styrene Rubber, Nitrile Polyblends and Nitrile Powder) and Synthetic Latex (XSB Latex, VP Latex, Styrene Acrylics and Nitrile Latex) in India.
Before diving into the Q4 FY25 results, it’s important to recall that Apcotex invested around ₹160 crore in its Nitrile Latex capacity expansion back in 2023. This product primarily caters to the medical gloves industry. Over the past two years, Apcotex’s trajectory has been weighed down by industry-wide overcapacity in nitrile latex—a consequence of multiple players, including Apcotex, ramping up investments when prices were elevated due to COVID-driven demand. In hindsight, the company’s capex decision aligned with the cyclical peak of the segment.
Now lets dive into Apcotex’s Q4FY25 results to understand where the story is heading now by looking into each product segment.
NBR (Nitrile Butadiene Rubber)
At present, 70-75% of the total domestic requirement of NBR is met through imports and the remaining 25-30% by Apcotex
Management said that they are running at 100% capacity utilisation in this business and they would do capacity expansion based on results of anti dumping investigations being done
The segment has pricing pressures due to over supply from countries like Korea and Russia
HSR
This is now only 5% of the business and volumes have declined here even though pricing is steady
This does not seem to be growth driver anymore
Latex (ex-Nitrile latex)
This segment mainly constitues Styrene Butadiene Latex and Styrene acrylic latex
In SB latex they are #1 player in India and they can grow inline with industry demand. I expect this to be GDP growth driven business in India. However, management says they are growing well in exports here and this would continue
Overall this segment had 82% capacity utilisation and management believes there is chance of both volume growth and margin improvement in this segment.
Brownfield expansion is likely 18 months down the line depending on market scenario.
Nitrile Latex
This is the big performance driver for Apcotex
As I said above that Apcotex invested around 160 Cr to enter into nitrile latex in 2023.
In FY25, management said they did 14-15% of revenues from nitrile latex implying around 200 Cr business came from here
As per export data, I see pricing of nitrile latex has dropped by 5-10% QoQ. It used to be around $0.85/kg and now it is more around $0.75/kg
As per the management, exit capacity utilisation in Q4 was 75-80% here
Management says that current 50K tons capacity can do 400-450 Cr revenues here. This implies that in FY26 with 80% capacity utilisation they should be able to do 300 Cr business from nitrile latex
They also said that ex-nitrile latex the margins of company would have been around 12%. This implies that nitrile latex business is running at either small loss or max breakeven
Management also said that with increase in capacity utilisation they expect margins here to improve.
Apcobuild
It is less than 5% of overall business but has decent profit margins as products here cater to downstream construction chemical demand
It grew in single digits in FY25 due to muted demand scenario in the industry.
Overall I think this has never garnered greater focus from management and has never been needle moving for them.
Summary
Overall Apcotex should do additional 100 Cr business from nitrile latex in FY26
Management says they would focus on improving margins in the rest of the business
In FY25, Apcotex did 143 Cr EBITDA for 1392 Cr sales. Given that nitrile latex is not earning anything, 135-140 Cr EBITDA would have been coming from rest of the business. If volumes in this business improve by 5-6% and 3-4% pricing jump comes, there is likelihood of EBITDA (ex- of nitrile latex) to improve by 10-15%. This implies Apcotex can do 150-160 Cr EBITDA (ex- of nitrile latex)
If nitrile latex business does 300 Cr business next year and due to operating leverage they are able to do even 10-20 Cr EBITDA here, total EBITDA for Apcotex could be 160-180 Cr in FY26
Management said that once nitrile latex margins improve more towards mean, the company margins could be 14-15%. This depends on nitrile latex pricing which used to be around $1/kg before COVID and is now more in $0.7-$0.8/kg range.
If FY26 EBITDA is 170 Cr and Apcotex gets 15x multiple, market cap could be 2600 Cr.
Longer term, nitrile latex business would achieve 400-450 Cr in sales at full capacity. This can happen in FY27. If Apcotex’s products pricing improves over next 2 years, they can go back to 14-15% margins and might be doing ~1700 Cr sales by then. This can push the EBITDA to 230 Cr+ and market cap could be anywhere around 3500 Cr in next 2-3 years.
Key Risks
Due to tariffs there is possibility of excess nitrile latex dumping from China as China’s gloves production can get reduced due to US market supply cutoff
Weak local demand across auto, paper, textile, contsruction etc. can impact both volume growth and pricing for Apcotex across products.
Apcotex is planning to do expansion in NBR segment where lot of dumping keeps on happening.
Short-term crude price declines are negative (inventory losses) though longer term low crude prices mean benign RMs mostly