Prabhudas Lilladhar recommends ‘buy’ for Finolex Industries, here's why
1 min read 28 Mar 2023, 08:11 PM ISTThe brokerage said that Finolex Industries will continue to hold the leadership position in agriculture pipe market and as March quarter (Q4) and June quarter (Q1) being seasonally strong quarters for agri-pipe volumes.
PremiumBrokerage firm Prabhudas Lilladher has given a ‘buy’ rating to Finolex Industries. The brokerage said that it remains ‘positive' on Finolex Industires volume growth and healthy margin with PVC-EDC spread for near term, it said.
In its note, Prabhudas said that Finolex Industries will continue to hold the leadership position in agriculture pipe market and as March quarter (Q4) and June quarter (Q1) being seasonally strong quarters for agri-pipe volumes.
It has given a ‘buy’ with a target price of ₹244, which is almost 35% upside.
“We remain positive on Finolex Industires (FNXP)’s volume growth and healthy margin with PVC-EDC spread for near term, post our recent management meeting. FNXP will continue to focus on maintaining its leadership position in agri. pipe market and Q4/Q1 being seasonally strong quarters for agri-pipe volumes will benefit the company, in our view. Also, higher PVC-EDC spread (in range of USD600-650/MT) will help in maintaining EBITDA margin between 16-17%. We expect Sales/EBITDA/PAT CAGR of 7.7%/31.9%/25.6% over FY23-25E and arrive at SOTP based TP of Rs224 (unchanged; valuing business at 21x FY25 EPS). Maintain ‘BUY’," said said Prabhudas Lilladher.
The brokerage noted that the company is focused on increasing contribution from plumbing segment to diversify its revenue mix.
“FNXP is focusing on increasing contribution from plumbing segment to diversify its revenue mix by increasing product basket, distributors and partnering with plumbers, contractors, MEP consultants & builders. CPVC volume contribution increased to 5.3% in 9MFY23 from 3.7% in 9MFY20. Plumbing volume contribution in FNXP reached 33% by 9MFY23, which is expected to increase to 50%. FNXP increased its SKUs to 2,200 - doubled in last few years," the report said.
On Tuesday, the company's scrip ended 0.73 per cent up at ₹165.50 on BSE.
