Finolex Industries Ltd. share price target

In Q4FY23, Finolex Industries (FNXP) reported pipe volume growth of 3.6% YoY (-9.9% QoQ, flat 4-year CAGR), driven by uptick in agri and plumbing demand, as PVC resin prices stabilised (close to their 10-year average). Consolidated EBIDTA margin expanded by 10.9ppt QoQ to 19.1% (+246bps YoY) driven by profitability improvement in both PVC pipes and resin segments.

We recently interacted with the management of Finolex Industries (Finolex) and following are the key takeaways: 1) Demand from agriculture pipes is yet to pick-up in Q4FY23 post strong demand seen in Dec’22 (partly due to dealer restocking as PVC prices started to increase post a sharp decline). It is hopeful of better demand scenario in March as the busy season for agriculture has started (Feb-May) and PVC prices remain attractive post the steep correction of ~34% YTD.

Finolex Industries (FNXP) reported a better than expected growth of 92.4% YoY (4-year CAGR of 11.2%) in pipe volumes on a low base. The segmental outperformance was driven largely by the agri segment as well as dealer restocking as PVC resin prices stabilised.

Finolex Industries (Finolex) has reported EBIDTA loss of ~Rs1.43bn due to steep fall in PVC prices (~23% decline QoQ) in Q2FY23.

Poor performance on significant inventory loss

Q2 revenue decreased 13% YoY as realisations in PVC resin/PVC pipes & fittings dropped 29%/17%