Finolex Industries Q3 Review - Weak Result With Less Visibility Of Rebound In The Near-Term: Systematix

NDTV Profit’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer NDTV Profit’s subscribers an opportunity to expand their understanding of companies, sectors and the economy..Systematix Research Report.Finolex Industries Ltd.’s large 27% earnings miss in Q3 was mainly due to lower realisation and weak margins in pipes and poor results of the PVC resin segment. Consolidated revenue declined 9% YoY (19% miss) driven by lower realization (down 10% QoQ) in pipes and large volume miss in PVC-resin (down 32% YoY). Gross margin contracted 389 basis points QoQ to 36%; Ebitda margin came flat QoQ at 11.8%. Weak margins in both the segments led to subdued margins. It generated Rs 1.16 billion cash flow from operation in Q3; the cash balance piling up to Rs 15.7 billion (yet to decide its usage). Pipes volume (down 10% YoY) came soft and inline. On near-bottom PVC prices, management is hopeful to double sales volume in three-four years with agri mix reaching 50% (from ~32% currently). For FY25, it expects single digit volume growth in agri segment (15-20% in non-agri). At $465/tonne PVC-EDC and $143/tonne PVC-VCM spreads, PVC-resin Ebit margin stood low at 9.6% (though recovered 180 basis points QoQ on liquidation of high-cost inventory). However, the current low spreads ($410/tonne and $140/tonne, respectively) suggest weak margins in near future. PVC-resin is a commodity business with no pricing power, hence the volatility in margins. We cut earnings by 15% for FY24 after a weak Q3 performance. However, we broadly maintain it for FY25E and FY26E. We now estimate 12%/45%/40% compound annual growth rate in Finolex Industries’ revenue/Ebitda/PAT over FY23-26E (FY18-23: 10%/-10%/-4% CAGR), as volume growth and margins in pipes segment likely normalise and expand. Given its low return on capital employed profile (~14% in FY26E) and ~20 times FY26E price/earning, we maintain 'Hold' rating on the stock, with an unchanged target price of Rs 220..Click on the attachment to read the full report:.Metro Brands Q3 Results Review - Disappointing Performance; Downgrade To 'Accumulate': Dolat Capital.DISCLAIMERThis report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit..Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

Finolex Industries Q3 Review - Weak Result With Less Visibility Of Rebound In The Near-Term: Systematix

Pipes volume (down 10% YoY) came soft and inline

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