The company held its analyst meet on 9th Nov'12 and was addressed by key management
Apcotex main products are Synthetic Latex and VP latex. Synthetic latex is used in Tyre, Paper and Paper Board Coating, Carpet Backing, Bonding and Waterproofing in Construction, Textile finishing, Paints and Distempers, Asbestos Joining, Brake Show Lining, and SV latex. The company has range of 50 products in this product line, the largest and only competitor in India is BASF. VP Latex - Here the competitor is Jubilant Industries
- Company's main customers are say in Tyre / Cord Dipper Industries – Apollo Tyres, Birla Tyres, Continental Modi Tyres, MRF, SRF, Century, Enka, in Paper & Paper Board – ITC, BILT, JK Paper, NR Group. In Rubber Industries – Paragon Footwear, Relaxo Footwear, Banik Rubber, in Construction Industries – Pidilite Inds, SIKA, Fosroc in Carpet Industries – Obeetee Industies, ABC Industries.
- Company gets 40/45% sales from Paper / Packaging segment, where company caters to FMCG sector, many of the customers of the company in this segment are expanding their capacity, which in turn will benefit the company. Apcotex derives very small percentage of sales from Paint Industry while it has 75% market share in carpet backing product.
- Top 10 customers contributes 45/50% of sales, while top 25 customers contributes 75% of sales, there is constant churning of top 10 clients of the company.
- Sale from domestic market for companies product is around 92%, rest comes from exports market. Company is targeting sales from export as 15/20% of total sales in next 5 years and is eyeing market in Middle East and south east Asian countries, where there is no local manufacturing for the products which Apcotex produces.
The plant of the company is strategically located at Taloja, which is 36 KMS from JNPT Port and 48 KMS from Mumbai Airport.1st Phase of expansion will go on trial from 1st week of Jan 2013, where the capacity will be expanded to 60000 m.tons from current capacity of 40000 m.tons saleable.2nd Phase of expansion will take saleable capacity from 60000 m.tons to 80000 m.tons saleable, likely to be completed by early 2014
- For 1st Phase of expansion, company would require to spend about Rs30 crore, but for the 2nd phase of capacity expansion, incremental capex of only about Rs 5 crore will be required as basic infrastructure will already be in place.
- Every 10k tonnes increase in production adds 80 crore of topline every year. Capacity utilization at current capacity is 85/90% with 30/40 days payment cycle.
- The replacement cost of the plant (excluding value of land) is 175/200 crore, which takes 2/3 years to set up. The industry has barriers to the new entrants, due to, Capital Cost, Technology, Raw Material Handling system / experience, Long Sales cycle time and Approval Process, Company needs to get approval of its products from its customers, before supplying the material, Approval process takes atleast 2 years.
- Raw material for the product is Petrochemical, out of 2 main raw materials; company totally imports one of them and sources the other locally. Volatility in raw material prices and availability of raw Material continues to remain challenge. The company has made contract with its customers on Monthly / Bi monthly fixed rates (Average 45 days), which gives flexibility to the company to pass on any increase in RM cost to customers.
- The company has policy not to hedge the Forex, as company can pass on the same on customers.
- It has been focusing on market share since last 5 years, hence there is decrease in EBIDTA margins, which company claims to improve going forward.
- New product introduced for construction industry should be growth area for the company in next few years which includes product in waterproofing and repair work, one such product has been trial launched in Mumbai and will gradually be launched across the country.
- Technology & hi tech plant of the company is competitive advantage, since last 10 years, the company has been running 2 plants in 3 shifts with total 80 people in production and production related department.
- Overall, the management expects sales of 368 crore for FY'13 and about Rs 500 crore for FY'14.
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