Buy This Mid Cap Plastic Sector Stock For 44% Gain, Target Price Rs 190: Edelweiss

Leading brokerage firm Edelweiss has assigned buy rating to mid-cap plastic sector stock Finolex Industries Ltd (FIL) with a target price of Rs 190. If you buy the stock today, you can get potential return of up to 44%.

According to the analyst, "Finolex Industries Limited (FIL)'s revenue came in at INR941cr (down 13.1% YoY), in line with our estimate and ~7% ahead of the consensus estimate of INR884cr on account of sharp decline in realisation across segments due to correction in PVC prices."

Check key takeaways below:

1. Finolex Industries Ltd Stock Performance

The last trading price of Finolex is Rs 132 apiece with 52-week high at Rs 234 apiece and 52-week low at Rs 128 apiece, respectively. The company has a market capitalisation of Rs 8249 crore as of writing the report.

2. Finolex Industries Ltd 5-Years Return

The stock has declined 6% in the last 5-years, surged 8% in last 3-years, and declined again 39% in last 1-year.

3. Inventory loss impacted Plastic Pipe segment

FIL's Pipes & Fittings' sales dropped by 11% YoY on a 17% YoY decline in realisation, despite volume growth of 7% YoY increase in realisation. However, Pipes & Fittings' realisation fell 14% sequentially to INR135.4 per kg in Q2FY23, following a peak of INR177.0 per kg in Q3FY22. Fittings revenue remained flat on 3% YoY volume growth, while realisation fell 2% YoY. Revenue from CPVC pipes rose 36% YoY to a record level of INR170cr, led by 11% YoY growth in volume and 22% YoY growth in realisation.

4. Valuation

According to Edelweiss, "FIL's performance was severely impacted due to sharp correction in PVC prices against the high-priced inventory of raw materials and finished goods. We continue to maintain our positive view on FIL due to a) higher exposure to the rural market, which is anticipated to perform better with the healthy monsoon, and b) expected traction in the Pipes & Fittings segment. We revise our FY23E and FY24E estimates downwards by 68% and 10%, respectively. We maintain our 'BUY' rating on the stock with a revised target price of INR190/share, valuing the stock at 24x FY24E earnings."

5. About FIL

Finolex Industries Limited (FIL) is India's largest backward integrated and most trusted manufacturer of PVC-U pipes and fittings for the plumbing-sanitation and agricultural sectors.

FIL was established in 1981, making PVC pipes from a plant in Pune, Maharashtra. Today, it has two strategically located plants in Maharashtra, at Ratnagiri and Urse, and a third in Masar, Gujarat, according to its official website.

Disclaimer

The stock has been picked from the brokerage report of Edelweiss. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.