YES Securities has given Reduce recommendation for Finolex Industries with a target price of Rs. 126 in its research report issued on Oct 25, 2022

YES Securities’ research report on Finolex Industries

Finolex Industries Ltd registered revenue decline of 13%YoY & 21%QoQ to Rs9.41Bn. Though volume growth for PVC & Pipes segment came in at 4% & 7% YoY respectively, sharp contraction in PVC resin prices during the quarter lead to significantreduction in Avg.realizations. PVC realizations degrew by 29%YoY & pipes realizations declined by 17% over similar period. Owing to this steep fall in PVC prices (~35%), company witnessed inventory losses which resulted into EBITDA loss of Rs1.4Bn in Q2FY23. Going ahead, we believe demand from non‐agricultural segment is expected to drive the growth in H2FY23. However, with lower PVC prices & pick‐up in Government projects, agricultural demand is expected to revive from FY24E. Hence, we reckon Pipe/PVC volumes to grow by 13%/12% CAGR over FY22‐FY24E respectively. On PVC prices, we do not foresee major contraction from hereon (fall of ~Rs5Kg is expected in coming months) & therefore inventory losses are likely to get restricted from H2FY23.


At CMP, the stock trades at P/E(x) of 16x on FY24E EPS of Rs8.4 (revised downwards by 10%). We continue to value the company at P/E(x) of 15x on FY24E EPS, arriving at a target price of Rs126 (previous Target Price: Rs139). Hence, we assign a REDUCE rating on the stock.

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