Motilal Oswal's research report on Fine Organics
Fine Organics (FINEORG) reported marginally lower-than-estimated results, with EBITDA at INR1.7b (our estimate of INR1.9b) and EBITDAM at 23.3% (down 250bp QoQ) in 3QFY23. Gross margin stood at 35.1% (down 310bp QoQ). This was due to the ease in global disruptions and in line with management commentary as well for the past couple of quarters. All the plants (except the one in Patalganga) are currently running at optimum capacity and the management expects full capacity utilization by end-Mar’23 for all including the Patalganga plant. FINEORG’s customers are also expanding their capacities, and therefore, the management foresees huge opportunities in the existing product portfolio and it plans to set up a new plant by Mar’24. However, no announcements have been made till now.
Outlook
The stock is trading at 30x FY24E P/E, EPS of INR168, and EV/EBITDA of 22x. We value the company at 35x Dec’24E EPS to arrive at our TP of INR5,650. Valuations remain expensive and we reiterate our Neutral rating on the stock.
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