Reduce Finolex Industries; target of Rs 212: CD Equisearch

CD Equisearch's research report on Finolex Industries

Despite pulverization of agri - pipes volumes during Q3, Finolex's PVC pipes & fittings segment managed to restrict its overall volume decline to just 10%, all thanks to robust growth in non-agri pipes which seems to have been by frantic activity in construction sector. With stress in agri pipes dispatches continuing for a while now, Finolex's PVC pipes & fittings volumes grew by a miserable 6.7% in 9MFY24. Barely ebullient PVC prices coupled with weak dispatches of PVC resins explain much of the timidity in revenues of Finolex's PVC segment, thus casting its harrowing shadow on the earnings - EBIT of this segment has trudged at quarterly average of some Rs 18 crs so far this fiscal as against some Rs 180 crs at peak in FY22. If it were not for the improved product mix of PVC pipes & fittings and strong volumes, overall margins would have taken a brutal knock.

Outlook

Weighing odds, we retain our reduce rating on the stock with revised target of Rs 212 (previous target: Rs 150) based on 25xFY25e earnings for a period of 9-12 months.