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HDFC Securities Institutional Research
We downgrade Fine Organics from buy to add, with a revised target price of Rs 5,290. The downgrade is largely owing to 22% increase in the stock price in the past three months.
The stock is trading at 40x FY24E EPS (EPS CAGR of 21% over FY22-24E, RoE of 31.7/28.0% in FY23/24E). We like Fine Organics, owing to (1) leadership in oleo-chemical based additives in the domestic and global markets with a loyal customer base, (2) unique business model with high entry barriers, (3) diversified product portfolio, and (4) pricing power.
Q4 EBITDA/APAT were 96/143% above our estimates, owing to a 31% rise in revenue, lower-than-expected raw material cost, higher-than-expected other income, lower-than-expected tax outgo, but were offset by higher-than expected other expense.
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