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LKP Securities
Fine Organic Ind (Buy)
Target: ₹3,232
CMP: ₹2,506.40
Fine Organic Industries (FOIL) is India’s largest oleochemical-based additives manufacturer with presence in domestic as well as international market. FOIL manufactures green additives derived from vegetable oils which are used in industries such as food & beverages, plastics/polymers, cosmetics, pharmaceuticals, rubber, paints and coatings etc.
Oleochemicals currently is at a nascent stage in the chemical industry. FOIL as a company is built around strong R&D capability, specialised knowledge and indigenously developed proprietary technology which makes it a market leader in the oleochemical industry. This industry has high entry barriers such as higher R&D cost, stringent regulations, long gestation period for product approval making this an oligopolistic industry with select few players globally. With growing awareness about the use of green additives, the demand for oleochemical-based additives is set to surge going forward.
Over the last seven years, the company has been able to report a net profit CAGR of approximately 34 per cent along with double digit growth in revenues. However during FY20-21, the company faced headwinds due to the onset of the pandemic and rise in raw material costs. We believe that oleochemicals is a multi-year growth story with FOIL being a key player.
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