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Systematix Report
Finolex Industries Ltd.’s Q2 (revenue/PAT up 85%/96% YoY, Ebitda margin 27.8%) was driven by higher realisations and strong PVC Ebit. While superior mix (fittings, CPVC) aided to Pipes Ebit (Rs 10.4/kg, 6.4% margin), low-cost inventory boosted PVC Ebit (Rs 44.3/kg, 35% margin).
Margins are likely to remain elevated in the near-term given tight demand-supply situation. However, management expects them to sustain in their historical average ranges (Pipes: Rs 8-10/kg, PVC: Rs 15-20/kg).
On the high margin base, we estimate ~5% profits CAGR despite a 26% revenue CAGR over FY21-23. Thus, on low profit CAGR and ~17x FY23e P/E, we find low potential in its scrip.
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