Subscribe to Fine Organics Industries Ltd: GEPL Capital

The company currently has 3 manufacturing facilities: the First Ambernath Facility; the Badlapur Facility; and the Dombivli Facility. These 3 facilities have a combined installed capacity of approximately 64,300 tonnes p.a. as at December 31, 2017. Each of their current manufacturing facilities has the ability to manufacture their wide range of products. 2 of their production facilities, the 1st Ambernath Facility and the Badlapur Facility, are fully automated. This helps ensure that they will continue to produce high-quality products, as well as minimizing the number of employees required to operate them, thereby reducing costs. All 3 of their production facilities are strategically located in
close proximity to the Jawaharlal Nehru Port (Nhava Sheva) located near Mumbai. As they are largely export-oriented, their facilities’ locations help reduce freight and logistics costs. The plots  of land on which they are planning to build the 3rd Ambernath Facility, the Fine Zeelandia Facility, the Patalganga Facility and the 4th Ambernath Facility are also located in close proximity to the Jawaharlal Nehru Port (Nhava Sheva) located near Mumbai. Their facilities require specialized facility design and
technologically sophisticated equipment. Their in-house team is capable of designing and assembling their production equipment at a much lower cost compared to what a third party contractor would
charge.

Valuation and Outlook
Fine Organics Industries Ltd (FOIL) stands to gain from operating leverage. At a P/E of 31x of FY17 EPS. We believe that it demands a discount to its domestic peers. We assign a Subscribe rating to the IPO.

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