Prabhudas Lilladher's research report on Fine Organic Industries
Fine Organic (FINEORG IN) reported a consolidated revenue of Rs6bn, reflecting a growth of 11% YoY and 18% QoQ. This was driven by an 18% sequential increase in both domestic and export revenues. However, the sharp rise in vegetable oil prices, key raw materials for the company led to a significant YoY decline in gross margin to 19.7%, RM prices are expected to stabilize going forward. All the company's manufacturing plants are operating at full capacity, except for the Patalganga facility (food grade), which is currently in the ramp-up phase. Fine Organic is establishing new subsidiaries in the USA and UAE to set up a manufacturing plant and improve supply chain efficiencies, respectively. The company has also received environmental clearance for its Rs7.5bn greenfield capex project on SEZ land. Construction is expected to commence soon and will take 18 months to complete from the start date.
Outlook
We believe this new facility will be a key driver for future growth, with a projected peak revenue potential of Rs26bn, based on an asset turnover of 3.5x. It is expected to meaningfully contribute to the topline starting FY28. At the current valuation, FINEORG is trading at ~24x FY27E EPS. We maintain our ‘BUY’ rating with a revised target price of Rs4,930, based on 29x FY27E EPS.
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