---------- Forwarded message ----------
From: Rajul Patel <rajul5234@gmail.com>
Date: Fri, Feb 26, 2016 at 1:01 PM
Subject:
To: Rajul Patel <rajul5234@gmail.com>
2/26/16, 9:44:07 AM: Rajul Patel: MOTILAL Retail: FINOLEX INDUSTRIES (INITIATING COVERAGE): Strong player in PVC pipes + improvement in margins on higher fittings sales + debt free status by FY19 + Jump in ROE from 5-yr average of 14% to 27% by FY18E = Scope for rerating
(FNXP IN, Mkt Cap INR 3795cr, CMP INR 306, TP INR 400, 31% Upside, Buy)
Click here to access detailed report
· Government's INR50000cr PMKSY scheme will boost demand for PVC pipes from agriculture. Finolex Industries derives nearly 70% of its pipes business from agriculture.
· Replacing galvanised steel pipes and demand from agriculture are expected to drive demand for PVC pipes in FY16 by 12%, with a 15% growth likely for the next two years.
· 25% growth in Fittings sales (14% of pipe segment revenues vs 20-25% for competitors) will aid margins to improve further.
· Pipes is expected to take up ~70-75% of the PVC production by FY18 and this will reduce volatility in overall earnings.
· Finolex plans to repay INR150-200cr of debt in FY16, and use Operating Cash Flows of INR650cr+ over FY17-FY18E to achieve debt free status by FY19E.
· We expect earnings to see a sharp jump in FY16 (300%+) followed by lower double digit growth in FY16 and FY17E.
· Reduced volatility in earnings and improvement in ROE to 27% in FY18 from 5-year average of 14% leaves scope for rerating.
· We value Finolex Industries at current TTM valuation of 21x and recommend to BUY for a TP of INR400.
Sent from my iPhone
From: Rajul Patel <rajul5234@gmail.com>
Date: Fri, Feb 26, 2016 at 1:01 PM
Subject:
To: Rajul Patel <rajul5234@gmail.com>
2/26/16, 9:44:07 AM: Rajul Patel: MOTILAL Retail: FINOLEX INDUSTRIES (INITIATING COVERAGE): Strong player in PVC pipes + improvement in margins on higher fittings sales + debt free status by FY19 + Jump in ROE from 5-yr average of 14% to 27% by FY18E = Scope for rerating
(FNXP IN, Mkt Cap INR 3795cr, CMP INR 306, TP INR 400, 31% Upside, Buy)
Click here to access detailed report
· Government's INR50000cr PMKSY scheme will boost demand for PVC pipes from agriculture. Finolex Industries derives nearly 70% of its pipes business from agriculture.
· Replacing galvanised steel pipes and demand from agriculture are expected to drive demand for PVC pipes in FY16 by 12%, with a 15% growth likely for the next two years.
· 25% growth in Fittings sales (14% of pipe segment revenues vs 20-25% for competitors) will aid margins to improve further.
· Pipes is expected to take up ~70-75% of the PVC production by FY18 and this will reduce volatility in overall earnings.
· Finolex plans to repay INR150-200cr of debt in FY16, and use Operating Cash Flows of INR650cr+ over FY17-FY18E to achieve debt free status by FY19E.
· We expect earnings to see a sharp jump in FY16 (300%+) followed by lower double digit growth in FY16 and FY17E.
· Reduced volatility in earnings and improvement in ROE to 27% in FY18 from 5-year average of 14% leaves scope for rerating.
· We value Finolex Industries at current TTM valuation of 21x and recommend to BUY for a TP of INR400.
Sent from my iPhone
--
R.K.Patel, Advocate.
"Anison", A/4,Swastik Society,
Nr. Stadium Circle, Navrangpura
Ahmedabad-380009.Gujarat. India.
(M) 9825032797
(O) 26560009 , 26448008
(R) 26861408, 9825032097
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