Stock Analysis

One Forecaster Is Now More Bearish On NOCIL Limited (NSE:NOCIL) Than They Used To Be

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Today is shaping up negative for NOCIL Limited (NSE:NOCIL) shareholders, with the covering analyst delivering a substantial negative revision to next year's forecasts. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

Following the downgrade, the current consensus from NOCIL's lone analyst is for revenues of ₹17b in 2024 which - if met - would reflect a reasonable 2.9% increase on its sales over the past 12 months. Statutory earnings per share are forecast to be ₹11.40, approximately in line with the last 12 months. Previously, the analyst had been modelling revenues of ₹20b and earnings per share (EPS) of ₹11.80 in 2024. It looks like analyst sentiment has fallen somewhat in this update, with a substantial drop in revenue estimates and a small dip in earnings per share numbers as well.

View our latest analysis for NOCIL

NSEI:NOCIL Earnings and Revenue Growth March 17th 2023

The consensus price target fell 8.9% to ₹240, with the weaker earnings outlook clearly leading analyst valuation estimates. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic NOCIL analyst has a price target of ₹280 per share, while the most pessimistic values it at ₹191. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's pretty clear that there is an expectation that NOCIL's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 2.3% growth on an annualised basis. This is compared to a historical growth rate of 18% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 11% per year. Factoring in the forecast slowdown in growth, it seems obvious that NOCIL is also expected to grow slower than other industry participants.

The Bottom Line

The most important thing to take away is that the analyst cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately the analyst also downgraded their revenue estimates, and industry data suggests that NOCIL's revenues are expected to grow slower than the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on NOCIL after today.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At least one analyst has provided forecasts out to 2025, which can be seen for free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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