Chemical stock's target price raised by HDFC Securities post Q3 results
Premium- The brokerage's Buy tag on the chemical stock is premised on constant focus on R&D, diversified product portfolio
Domestic brokerage house HDFC Securities' Buy recommendation on chemical stock Fine Organic Industries (FOIL) is premised on constant focus on R&D, diversified product portfolio, capacity-led expansion growth opportunity, and leadership in oleo-chemical based additives in the domestic and global markets with a loyal customer base.
The company's Q3 EBITDA/APAT were 13/13% above HDFC Securities' estimates, owing to a 25% rise in revenue, lower-than-anticipated depreciation, offset by higher-than-expected raw material cost, and higher- than-expected tax outgo. The brokerage and research firm has raised its target price to ₹4,380 (from ₹4,220 earlier) of Fine Organic shares.
The chemical manufacturing company's revenue grew 6/55% QoQ/YoY to ₹4.6 billion in Q3, on the back of continued traction in exports, higher volumes, and better realisations. The contribution of exports to total revenue was 59% in 9MFY22. Gross margin remained flat sequentially, on account of higher raw material costs and higher freight costs.
Currently, all plants of the company are running at optimum capacity and it expects them to reach full capacity by Mar-23, a year earlier than guided previously. The phase-2 capacity expansion at Patalganga is on track and will be commissioned by Mar-22. The company is planning to acquire a big land parcel in Gujarat for further expansion, the brokerage note highlighted.
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.
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