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Systematix Research Report
Finolex Industries Ltd.’s Q4 FY22 performance was a mixed bag, as volumes in pipes recovered (up 31% YoY and 67% QoQ), driven by agri and plumbing pipes.
But, polyvinyl chloride resin Ebit fell sharply (~Rs 20/kilogram, down 55% YoY and 52% QoQ; 15% margin) on lower PVC-ethylene dichloride spread.
Management guided double-digit volume growth for pipes in FY23. However, we expect volatility in PVC resin margins to sustain, which should normalise at the historical 16-18% range over the long term.
On these factors, we cut earnings estimates for FY23 and FY24 by 7% and 10% respectively.
On a ~5% revenue compound annual growth rate over FY22-24E, we now estimate a 4% contraction in adjusted profit.
Finolex’s stock price has fallen by over 35% since October 2021 on these concerns.
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