Target: ₹196

CMP: ₹169.75

We recently interacted with the management of Finolex Industries (Finolex) and following are the key takeaways: 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 about 34 per cent YTD. Plumbing demand continues to remain steady as uptick in housing market sustains. Profitability should normalise in pipe segment as PVC prices have stabilised in endDec’22, thus, resulting in no inventory losses.

In PVC resin segment, too, margins should improve QoQ as high cost inventory was mostly consumed in Q3FY23.

We believe it has near-term demand tailwinds as demand from agriculture segment (which accounts for about 60-65 per cent of revenues) sees traction due to lower PVC prices and also margins are expected to normalise as PVC resin prices have stabilised.

Maintain estimates and upgrade the stock from Add to Buy with an unchanged Mar’23 SoTP-based target price of ₹196.

Published on March 3, 2023