The shares of a chemical company, specializing in manufacturing auxiliaries and specialty chemicals for textiles, construction, water treatment, fertilizer, and more in focus brokerage company KR Choksey initiated a Buy Target on it with a 44 percent Upside Potential.
Price action
With a market capitalization of Rs. 2,922.24 crores on Monday, the shares of Fineotex Chemicals Limited jumped upto 0.2 percent making a high of Rs. 260.80 per share compared to its previous closing price of Rs. 260.25 per share.
What Happened
Fineotex Chemicals Limited engaged in the business of manufacturing auxiliaries and specialty chemicals for textiles, construction, water treatment, fertilizer, leather, and paint industries in focus after KR Choksey initiated a “Buy” target price of Rs. 366 with a 43.9 percent upside potential.
The reasons for the “Buy” target
- Muted Growth during the quarter was affected by order postponements and geopolitical issues
Revenue declined by 9 percent YoY in Q3FY25, totaling Rs.1,259 Mn, which was driven by order postponements, a contraction in the Cleaning & Hygiene Segment, and lower product realizations.
The Textile segment saw growth with 30 new customers, a 20 percent increase in volumes, and a 12 percent rise in revenues. Order delays were mainly due to supply chain issues in Bangladesh, expected to be resolved in the coming quarters. Exports’ share in revenue dropped to 19 percent from 24 percent last year.
- New Product Launch
FCL has launched Aquastrike, a sustainable insecticide based on Azadirachtin, derived from neem, targeting mosquito repellency. The product is water-soluble, offering a more eco-friendly alternative to traditional smoke-based chemicals. This innovation opens new opportunities in the water segment for the company.
- Updates on Inorganic Expansion & New Manufacturing Facility Progress
The company has raised Rs. 3,425 million through equity shares and warrants, to be received over the next 9-10 months and the management plans to use these funds for EPS-accretive acquisitions. If not deployed quickly, the cash could negatively impact ROE/ROCE multiples.
- A dividend of INR 0.40/share was approved by the Board
The board has approved a dividend of Rs. 0.40/share totaling Rs. 45.8 Mn as an Interim Dividend for FY25
Analyst Estimations
The analyst estimates for FY27 include a 3-year revenue CAGR of 16 percent and EBITDA margins of 28 percent, and considering upcoming positive triggers for the company like buoyancy in the textile markets, upcoming inorganic expansions, and new sustainable product launches, we value the company at 20x FY27E EPS of Rs.16.6 to arrive at a target price of Rs. 366 implying an upside of 43.9 percent.
Key Concall Highlights
Strong Growth is expected in new segments: Fineotex is witnessing robust growth in oil & gas and water treatment segments, with a strong order pipeline expanding geographically. Diversification into high-demand industries like specialty chemicals for industrial applications enhances long-term stability.
Sustainability and Innovation at the Core: The company has launched 30 new products this quarter, focusing on eco-friendly and high-performance solutions. A key innovation, AquaStrike Premium, is a biotechnology-based, eco-friendly mosquito control solution, presenting a strong market opportunity.
Expanding Production Capacity: A new manufacturing facility is expected to be operational by Q2 FY26, increasing production efficiency and supporting growing demand. The company is implementing renewable energy solutions, including a 100-kilowatt solar plant at Ambernath, and optimizing processes for zero discharge of hazardous chemicals.
Inorganic Growth & Acquisition Strategy: The company has earmarked Rs. 300 crores for acquisitions, with a focus on EPS accretive deals. Ongoing M&A discussions are progressing cautiously, ensuring synergy and disciplined capital allocation before finalizing any acquisitions.
FMCG Sector Recovery Expected: While FMCG demand was muted, management anticipates a rebound due to favorable taxation policies and rural demand recovery. The upcoming summer season is expected to boost demand for hygiene and cleaning products, further aiding growth.
Written by Sridhar J
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