Motilal Oswal sees upside in this Saurabh Mukherjea chemical stock pick
Premium- Fine Organic is a leading producer of specialty additives for foods, plastics, rubbers, paints, inks, cosmetics, coatings, and several other specialty applications
For the quarter ending June 2021, chemical manufacturer Fine Organic Industries reported in-line revenues, while the gross margin stood at 31%, the lowest in the last 16 quarters. Brokerage firm Motilal Oswal believes that a ramp-up in the utilization levels of additional capacities by FY23 to optimal levels as well as the strong demand outlook for the Indian Food Emulsifiers market should help Fine Organic grow at a faster rate than the industry.
Fine Organic Industries produces oleo-chemical based food, polymer and certain special additives in India and amongst the leading players globally. It is is a leading producer of specialty additives for foods, plastics, rubbers, paints, inks, cosmetics, coatings, textile auxiliaries, lubes and several other specialty applications.
Higher disposable incomes, coupled with the rising trend of eating healthy, are expected to drive the global Food Additives market, with this trend catching up in India too. Fine Organic is setting up a new joint venture facility in Thailand, with Oleofine Organics Thailand Co. (OFT) and Oleofine Organics Sdn. (OFM) – Malaysia. “Once the JV is set up, the company would have easier access to its primary raw material, palm oil – Indonesia, Malaysia, and Thailand are the major (88%) producers of palm oil globally,'' Motilal said in a note.
The brokerage has a Neutral rating on Fine Organic stock with a target price of ₹3,134 per share. It said that the demand outlook looks strong however expects margins to remain subdued.
Money manager Saurabh Mukherjea is the Founder and Chief Investment Officer of Marcellus Investment Managers. Fine Organic is part of Marcellus Investment's Little Champs Portfolio.
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