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Buy This Mid Cap Stock With A Target Price of Rs. 4,220: HDFC Securities

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HDFC Securities one of the largest stock broking firms in India has suggested buying the stock of Fine Organic Industries Limited with a target price of INR 4,220. The brokerage predicts an 18 percent gain for the stock, which had a market price of Rs 3,571 at the time of buy call and is now trading at Rs 3,580 on the National Stock Exchange (NSE). In India, Fine Organics is a prominent manufacturer of chemical additives for foods, plastics, rubbers, paints, inks, cosmetics, coatings, textile auxiliaries, lubes, and a variety of other purposes.

 

Q2 financial performance of Fine Organic Industries Ltd.

Q2 financial performance of Fine Organic Industries Ltd.

According to the brokerage, the company's "Revenue grew 23/62% QoQ/YoY to INR 4.4bn, on the back of strong domestic demand, continued traction in exports driving volumes, and higher realisations. The contribution of exports to the total revenue was 60% in H1FY22. Gross margin came in at 33.3% (+104/- 431bps QoQ/YoY) in Q2, improving sequentially as customers are now accepting price hikes on account of higher raw material costs and higher freight costs."

The brokerage has clarified that the company's "EBITDA came in at INR 0.7bn, +41/+43% QoQ/YoY, with EBITDA margin improving sequentially to 16.7% (+212/-223bps QoQ/YoY), owing to lesser opex. APAT was INR 0.5bn (+39/+60% QoQ/YoY)."

Buy Fine Organic Industries Ltd. with a target price of INR 4,220
 

Buy Fine Organic Industries Ltd. with a target price of INR 4,220

HDFC Securities in its research report has said that "Our BUY recommendation on Fine Organic Industries (FOIL) with a target price of INR 4,220 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."

"We expect FOIL's PAT to grow at a 41% CAGR over FY22-24E, led by a 36% CAGR in EBITDA. In the absence of any major Capex in the coming years, the RoCE would expand from 20% in FY22E to 29% in FY24E. Q2 EBITDA/APAT was 26/37% above our estimates, owing to a 22% rise in revenue, lower-than-expected raw material costs, lower-than expected depreciation and higher-than-expected other income. Q2 financial performance: Revenue grew 23/62% QoQ/YoY" the brokerage has further claimed.

Disclaimer

Disclaimer

The above stock was picked from the brokerage report of HDFC Securities Ltd. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.

Story first published: Saturday, November 20, 2021, 9:11 [IST]
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