Fineotex Chemical share price: Nirmal Bang sees 25% upside in long-term. Should you buy?

Stocks to buy today: Fineotex Chemical share price has been on an uptrend after ushering in June 2024. The chemical stock bottomed out at ₹325 to ₹330 zone, and since then, the stock has been rising continuously, delivering around a 12 percent return in one month. However, Nirmal Bang sees more upside in the script. The brokerage believes that the company's fundraising move worth ₹218 crore is expected to boost the company's fundamentals, as the money generated would be used for the company's expansion. The brokerage said that Fineotex Chemical share price might touch ₹483 in the long term. As the stock is trading around ₹390, the brokerage expects a 25 percent upside in the chemical stock.

Fineotex Chemical share price outlook

Regarding the valuations of Fineotex Chemical shares, the Nirmal Bang report said, “Fineotex has delivered healthy financials over the last few years despite macro challenges that impacted overall chemical industry financials. In FY24, it delivered healthy volume growth of ~25%, where capacity utilization stood at around 72%. At the same time, the industry has witnessed an impact on volumes mainly due to subdued demand from global markets. International revenue contribution maintained at 22% of FY24 revenue. Fineotex Chemical received approval for fundraising through an issue of share warrants and equity shares worth ₹218 crore to fund the company's business expansion through organic/inorganic growth and working capital requirements. The same is proposed at an issue price of Rs. 387.4 each per unit, which gives a positive indication. Overall, the company is expected to dilute 11.6% of its equity in the future.”

Peer comparison

"In terms of topline growth between FY20-24, Fineotex has grown ahead of many leading players. The high revenue growth of Rossari Biotech is due to inorganic growth. It has also outperformed in profitability, with a 26.1% EBITDA margin in FY24 compared to 14.9% of the average peer performance. Additionally, it has delivered healthy return ratios when compared with its peers. Despite its healthy financial performance, Fineotex is valued at a similar valuation compared to its peers. We expect a re-rating of the stock because of its strong growth drivers," the brokerage said.

Fineotex Chemical share price target

On a suggestion to investors regarding Fineotex Chemical shares, Nirmal Bang's report said, 'We have modelled topline growth at 20% CAGR between FY24-26E with operating margins in the range of 27-28%. Based on this, the stock is currently trading at 29x / 24x to FY25E / FY26E EPS. We assign 30x to FY26E EPS to arrive at a target of Rs. 483/share with an upside of 26% over the CMP."

Disclaimer: The views and recommendations above are those of individual analysts, experts, and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.