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Motilal Oswal Report
The long-term prospects for Fine Organic Industries Ltd. remain robust, as the company operates within the oleochemicals industry and has consistently driven growth through research and development innovations over the years.
However, we anticipate that its performance may be adversely affected in the near-to-medium term due to the following:
longer-than-expected delays in the commissioning of new capacities for expansion,
existing plants operating at optimum utilization with no potential of debottlenecking, and
further delays in the commencement of commercial supplies from the Thailand joint venture.
We estimate a compounded Ebitda/profit after tax decline of 1% each over FY24-26, with margin in the range of 21-22% during the same period.
Fine Organic is currently trading at ~44 times FY26E EPS and ~30 times FY26E EV/Ebitda.
Valuations appear expensive for a company that is going to experience a YoY earnings decline for the next two years (-1%/-2% in FY25/26). We reiterate our Sell rating on the stock with a target price of Rs 4,095.
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