Result Update: Finolex Industries Ltd - ACCUMULATE - TP Rs.671 - Kotak

Finolex Industries Q1FY19 results was ahead of estimates with strong volume in pipes segment and margins improved across segments.

Key Highlights

- The company reported 13.3% yoy growth in net sales (adjusted for excise). The growth in revenue was driven by 8.6% yoy growth in volume in PVC pipes segment and improved realization in both pipes and resin segment. The improvement in realization is led by better product mix and reduced discount in pipes segment.

- EBITDA margin at 23.4%, improved by 550 bps yoy, was ahead of our estimates due to higher margin across both segment due to 1) better PVC EDC spread and inventory gain in resin business; and 2) better product mix and reduction in discounts in pipes and fittings business.

- The company targets to grow at double digit rate in volume terms in the longer run driven by positive outlook for both agri and plumbing segment

Outlook and Valuations

We maintain our estimates for FY19E & FY20E. The stock is presently trading at PE of 21.4x and 18.2x on FY19E and FY20E EPS of Rs 28.6 and 33.6 per share, respectively. We maintain our Accumulate rating on the stock with target price of Rs671, valuing the stock at 20x on FY20E earnings.

Shares of FINOLEX INDUSTRIES LTD. was last trading in BSE at Rs.620.5 as compared to the previous close of Rs. 613.8. The total number of shares traded during the day was 2463 in over 186 trades.

The stock hit an intraday high of Rs. 624.25 and intraday low of 612.15. The net turnover during the day was Rs. 1530038.

Source : Equity Bulls

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