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Religare Broking
Finolex Ind (Buy)
Target: ₹222
CMP: ₹171
Finolex Industries is a leading manufacturer of PVC pipes and fittings (installed capacity 3,70,000 tonne per annum) and the only backward integrated player in PVC resin (installed capacity of 2,72,000 tpa). The company offers the latest range of PVC-U pipes and fittings which are used in agriculture, construction and industrial operations. Further, for providing better service to customers, it has strategically located manufacturing plants at Urse and Ratnagiri in Maharashtra and Masar in Gujarat.
For the distribution network, the company has over 900 dealers and 21,000 retailers’ touch points. Besides its strong brand recall value, growth plans and expansion in the PVC pipes segment are encouraging which makes it one of our preferred picks in this space. On the financial front, FIL has a healthy balance, decent cash flow and it has lowered its debt to comfortable levels over the years.
Key investment reasons are: increasing demand for PVC pipes to drive healthy sector growth; sole manufacturer of PVC resin is an advantage; and mix of agri and non-agri pipes segment, which would help the company in earning strong revenue and margins. Key risks are: high volatility in commodity price i.e. raw materials for manufacturing PVC resin, can impact the profits of the company; and dispute in promoters over the ownership of Finolex group.
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