Fine Organic Q3 Results Review - Slowdown In Export Markets Hurts Performance: Motilal Oswal

Motilal Oswal Report

Fine Organic Industries Ltd. reported inline Ebitda at Rs 924 million in Q3 FY24. Ebitdam contracted 160 basis points YoY to 21.7%, while gross margin improved 660 bp YoY to 41.8% primarily due to a sharp decline in raw material costs. In a declining input cost scenario, the company would have to pass on the benefits of the same to the customers, and therefore, we expect its margin to contract further in the coming quarters.

All plants are currently running at optimal capacity, except Patalganga-II, where there is still some headroom for capacity ramp up. However, the management has ruled out debottlenecking existing capacities due to safety concerns.

Fine Organic is currently awaiting physical land allotment (~30 acres) in Special Economic Zone and expects to complete the whole process before March- 24. Although the board has approved the company's capex plans, the official announcement will only be made after the land is allotted.

We have kept our numbers unchanged as of now, given that the performance in Q3 was in line with our estimates and guidance was more or less the same.

Valuations too are expensive, with the stock trading at ~46 times one-year forward price/earnings, which does not warrant such high valuations in a company that is going to have YoY earnings decline for the next three years (-39%/-4%/-4% in FY24/25/26).

We maintain our 'Sell' rating on the stock.

Click on the attachment to read the full report:

DISCLAIMER

This 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.