HDFC Securities
Fine Organic Ind (Buy)
Target: ₹3,910
CMP: ₹3,507.2
Our Buy recommendation on Fine Organic Industries 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. In the absence of any major Capex over the next two years, the RoCE would expand from 19 per cent in FY22 to 28 per cent in FY24.
FOIL’s margins have been under pressure for over a year, owing to: the volatile and high raw material prices; and high freight cost impacted by global supply chain disruption. Raw material prices continue to be high currently, but aren’t as volatile, owing to reduction in import duty on vegetable oils by the Government, reduction in the ceiling rate of its crude palm oil export levy by Indonesia and reduction in excessive buying done by China.