This Speciality Additive Mid-Cap Stock Declares Rs 9/Share Dividend, Gets 'Buy' Rating

Leading stock-broking firm Prabhudas Lilladher has placed a 'Buy' rating on Fine Organic Industries, a mid-cap company specialised in high-quality additives for specialty applications. The company was founded in 1970 with headquarters in Mumbai. The company has posted a strong performance for Q4FY23 and has declared a final dividend of Rs 9/share on May 24, 2023.

Based on the strong operating profit performance adjusted for inventory build-up, the stock-broking firm sees potential growth going ahead for the company.

Fourth quarter performance

Fine Organic Industries reported that its consolidated revenue was at Rs 6 billion (-3% YoY/-21% QoQ) and its standalone revenue was Rs 7 billion (+16%YoY/-7%QoQ). The brokerage feels that it was in line with its estimates of Rs 7.03 billion, and consensus of Rs 7.15 billion).

Even the consolidated gross margin (adjusted for inventory build-up) is at 45.8% (vs33.8% in Q3FY23 and 44% in Q4FY22). While the reported EBITDA is Rs 2.02 billion (+27% YoY/ +27% QoQ), the adjusted EBITDA stood at Rs 1.8 billion, marginally higher than the expected (Rs1.7bn and consensus at Rs 1.6 billion). The EBITDA margin is at 30% (vs 21.1% in Q3FY23 and 25.9% in Q4FY22). Margins ahead of Prabhudas' and street estimates: PLe 24.1% & Consensus 22.2%.

As per the brokerage firm, there is an inventory buildup at the subsidiary level (higher inventory at warehouses - especially. in the US; in-line with customers' requirement); to the extent of Rs1.25bn (difference between a change in inventory of consol - standalone). This is against a Rs 1.02 billion knock-off in revenue (consol - standalone). The resultant inventory adjustment is Rs 0.23 billion.

The profit after tax was up at Rs 1.5 billion (+23% YoY/+41% QoQ) while adjusted PAT stands at Rs 1.28 billion (in line with the assumed estimate of Rs 1.28 billion; consensus Rs 1.14 billion) on lower other income.

For the full financial year, FY23 revenue stood at Rs 30.2 billion (+61% YoY), EBITDA at Rs 8.3 billion (+128% YoY), margin at 27.5% vs 19.4% YoY, PAT at Rs 6.2 billion (+138% YoY; EPS Rs 202).

Additionally, the company's free cash flow was strong, reported to be Rs 4 billion (despite the inventory build-up) translated into net cash of Rs 5.2 billion, to aid self-sustained capex.

Dividend Details

In the company board meeting held on Wednesday, the directors recommended a final dividend of Rs 9 per equity share of Rs 51 each fully paid-up for the financial year ended March 31, 2023.

The board also decided to convene the annual general meeting (AGM) on Thursday, August 24, 2023. The company did not share book closure and record date details yet.

View & Rating

Prabhudas Lilladher suggested that the spreads expanded QoQ, as the decline in end product prices is lower vs the decline in the raw material basket (oleochemical feedstock prices for eg. rapeseed oil, palm oil, etc. were down upto 20% QoQ). However, it has mentioned, "We have a 'Buy' rating currently and will review our estimates after discussion with the management tomorrow."

Stock Movement

The share price of Fine Organics Industries stock is marginally down by 0.30% to Rs 4,487.15% on an intraday basis, at the time of writing this copy. In the last one year, the share has rallied by 8.72%, and in the last three years, it has surged massively by 127.24%.

Disclaimer

The stock has been picked up from the brokerage report of Prabhudas Lilladher. Greynium Information Technologies, the author or the brokerage firm will not be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.