Buy Finolex Industries; target of Rs 230: ICICI Securities

ICICI Securities research report on Finolex Industries

In Q1FY24, Finolex Industries (FNXP) reported pipe volume growth of 28.1% YoY (+13.2% QoQ, flat 4-year CAGR) on a low base, driven by an uptick in agri sector (70% vol mix) and sustained demand from plumbing segment. Consolidated EBIDTA margin contracted 612bps QoQ to 12.9% (+235bps YoY on low base) primarily due to a steep decline in the profitability of PVC resin segment (EBIT/kg down 96.6% QoQ due to contraction in PVC-EDC/VCM spreads). Pipe EBIT/kg was up 23.7% QoQ to INR13.7(+132% YoY) driven by operating leverage and lower power cost. With PVCEDC/VCM delta normalising, we expect profitability to improve going ahead.

Outlook

We tweak estimates and roll over our SoTP-based TP to INR 230 (vs INR 210 earlier) for Sept’24. Maintain BUY led by demand tailwinds and improved profitability.

For all recommendations report, click here