Target: ₹253
CMP: ₹204.90
Weaker realisations arising from volatility in PVC prices, coupled with subdued volume growth, have impacted revenue booking of Finolex’s PVC pipes and fittings business. Revenues slid to ₹1,168 crore in Q4-FY25 from ₹1,182 crore a year before. PVC resin volumes nosedived too: 56,018 tonnes vs 69,215 tonnes.
With poor volume offtake, margins took a hit too. EBIT of the PVC pipes and fittings business slid to ₹107.64 crore from ₹132.81 crore in the same quarter a year ago. As a consequence, EBIT margin softened by some 200 bps to 9.2% last quarter, implying per kg margin of ₹10.5 Vs ₹ 13.3.
The stock currently trades at 21.7x FY26e EPS of ₹9.48 and 18.8x FY27e EPS of ₹10.98. Enhanced pricing power, reduced volatility in PVC prices and improving spreads would catalyse earnings in the current fiscal, estimated to rise by 32 per cent. Yet with product replication not painstaking, Finolex’s competitive advantage rests on enhanced penetration of its wares, particularly non-agri pipes.
For scaling its PVC pipes business, Finolex need to resolutely “surf the wave” of the Centre’s enhanced focus on water and housing infrastructure. Yet the risk of competitive pressures fomenting again remains. Weighing odds, we assign a buy rating on the stock with a revised target of ₹253 (previous target: ₹212) based on 23x FY27earnings over of 9-12 months.
Published on July 10, 2025