NOCIL Ltd Q3 FY2026 Concall Summary

Key Takeaways

• Domestic strength, export drag: High single-digit domestic volume growth in Q3, with YoY in strong double digits, was offset by a sequential export decline driven by U.S. tariff uncertainty and seasonal effects.
• U.S. volumes expected back soon: Management expects roughly 50% of lost U.S. volumes to return within a 2- to 3-month horizon following recent tariff structure revisions.
• Antidumping catalyst approaching: Investigations on select key products are underway, with findings expected to conclude in the next 1.5 to 2 months, a potential structural positive for domestic realizations.
• Margin expansion path laid out: Management targets at least 150 bps plus or minus of annual EBITDA margin improvement over the next 2 to 4 years, driven by cost savings, operating leverage, and new product ramp-ups.
• What to watch next quarter: The actual pace of U.S. volume recovery, the outcome of antidumping investigations, and the production trial timeline for the new TDQ antioxidant facility at Dahej.

Demand & Volume Dynamics

• Domestic market: High single-digit volume growth in Q3, with year-on-year performance in strong double digits; momentum expected to continue into Q4, supported by healthy tire industry demand and infrastructure investments.
• Export weakness: Export volumes declined sequentially in Q3 due to year-end seasonal effects and lower U.S. orders on account of tariffs; 9-month export volumes down 8-9% YoY, with weakness concentrated in Latex markets and Europe.
• U.S. recovery bet: Recent revisions in U.S. tariff structures are expected to trigger a recovery in volumes; management sees roughly 50% of the previous U.S. run rate returning in a 2- to 3-month horizon, with FY26 exports reaching at least flat levels by year-end.
• FY27 growth outlook: Double-digit volume growth expected, with the large part coming from base capacity rather than the new TDQ facility; domestic buoyancy and trade agreements with the U.S. and EU are expected to provide a fillip.
• Trade agreement tailwinds: The recently concluded India-EU FTA (expected to come into play around calendar year 2027) and U.S. tariff revisions are seen as positive for both tire and non-tire sector volumes.

V. S. Anand: "Roughly about 50% of that, yes."

Antidumping & Trade Defence

• Petitions filed: Antidumping petitions on select key products have been filed with the Government of India; authorities have initiated detailed investigations after seeing merit in the submissions.
• Timeline: Findings are expected to conclude in the next 1.5 to 2 months, following an administrative delay due to DA transfer and restructuring that required a mandatory repeat of public hearings and a 3-month protocol extension.
• Country coverage: Four product notifications exist, covering combinations of China, EU, USA, Korea, and Thailand; a separate case against Korean antioxidant producers is also under investigation.
• Origin rule: Antidumping duties apply on country of origin, not country of supply, a distinction management clarified when discussing import patterns.
• Imports: Not expected to significantly increase from current levels, with the India-EU FTA seen as positive on balance and some raw material benefits expected once it comes into play, though not sizable at this point.

P. Srinivasan: "No, no. I think the antidumping is applicable on country of origin, not country of supply. So, the customs look at the country of origin from where it is originated."

New Products & Capacity Expansion

• TDQ antioxidant facility (Dahej): Progressing ahead of original schedule, with production trials planned during the first half of calendar year 2026; utilization expected to start improving towards the end of the next financial year, with a slow ramp-up given sizable volumes and customer approval timelines.
• New product soft launch: One of the products in the pipeline has had a soft launch with customer trials, taking a slow ramp-up speed; FY27 will start slower, with FY28 and FY29 expected to pick up speed once approvals start coming in.
• Volume contribution target: Management expects these new products to contribute at least 10% to 12% of current volumes eventually.
• FY27 base capacity growth: The large part of expected double-digit volume growth in FY27 will come from base capacity, not the new TDQ facility, which will contribute more meaningfully only after approvals.

V.S. Anand: "FY '27 will start be on the slower side, but I expect that from FY 28 and FY 29, it should pick up speed. Once the approvals start coming in, then it starts picking up much faster."

Margins & Cost Structure

• Gross margin per kg: Currently at one of the lower ends of the spectrum; more initiatives are underway expected to play out in the next few quarters, with some improvements already embedded in EBITDA per kg.
• Cost savings achieved: A 9-month reduction in other expenses was driven by conscious working capital control (production aligned with inventory adjustment), lower utility requirements, and negotiated fine rates on SMB freight to customers.
• Raw material pass-through: Aniline price increases have been happening gradually since the beginning of the year; the company expects to be able to pass these through.
• EBITDA margin target: Management targets at least 150 bps plus or minus of annual improvement over the next 2 to 4 years, though declined to give a specific steady-state margin band when asked.
• Ongoing effort: Cost savings initiatives are not stopping; management intends to continue looking at other areas for further improvement.

P. Srinivasan: "While we have achieved this, we don't wish to stop it here. We would like to continue this effort to look at other areas and see how best we can."

Guidance & Commitments

Key Metrics