Finolex Industries Q3 Review - Stretched Valuations Compel Us To Maintain A 'Sell' Rating: Yes Securities

Yes Securities Report

Finolex Industries Ltd. registered strong volumes of 81,312 tonne, a degrowth of 10%YoY (high-base) and a robust growth of 29%QoQ (three-year compound annual growth rate stood at 14%), driven by plumbing and sanitation pipes.

Pipes average selling price declined to Rs 122/kilogram from Rs 136/kg in the previous quarter owing to fall in PVC resin prices. Consequently, Ebit/kg came in at Rs 9.1 as against Rs 10.7 in Q2 FY24. Resin business continued to remain under pressure wherein volumes declined by 32%YoY and grew by 17% QoQ (low base).

The ASP of this segment stood at Rs 73/kg, a decline of Rs 6/kg on sequential basis. Ebit/kg came in at Rs 7.1 versus Rs 5.4 in the previous quarter. Overall Ebitda margins remained flattish on a sequential basis at 11.8%.

At current market price, the stock trades at a rich price/earning ( times) of 27.2 times /25.1 times on FY25E/FY26E earning per share of Rs 8.5/Rs 9.2.

We continue to value the company at a price/earning (times) of 20 times on FY26E EPS, arriving at a target price of Rs 185, maintaining 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.