Result Update: Finolex Industries Ltd - BUY - TP Rs.712 - Kotak

Finolex Industries Ltd (FIL) Q1FY18 results were below our estimates on account of slow revenue in pipes and fittings business with lower margins. Net revenue for the quarter grew by 6.1% yoy to Rs 8.2 bn with PVC pipes and fittings sales in value and volume terms grew by 4.7% and 8.2% yoy respectively and was below our estimates. PVC pipes sales picked up strongly in April and May month after the demand revived post demonetization, but slowed down in the month of June due to lower off-take by dealers pre-GST in June. EBITDA for the quarter declined by 18% yoy to Rs 1.3 bn with EBITDA margins at 15.8% on account of inventory loss led by lower landed price of PVC (~Rs 6 per kg) in the month of April and also GST led destocking. As per management, GST led disruption is over and demand has recovered from end of July. The company continued to target for double digit volume growth in pipes and fittings business in FY18E with positive outlook on agri and non agri-pipes segment. We have cut our earnings estimates for FY18E by 7% factoring in lower realization and margins in Q1FY18 and maintain our FY19E earnings. We maintain our BUY rating on the stock with target price of Rs 712.

Shares of FINOLEX INDUSTRIES LTD. was last trading in BSE at Rs.590 as compared to the previous close of Rs. 600.6. The total number of shares traded during the day was 9608 in over 1271 trades.

The stock hit an intraday high of Rs. 599.95 and intraday low of 588.05. The net turnover during the day was Rs. 5672751.

Source : Equity Bulls

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