Finolex Industries Q1FY17 results were better than estimates in terms of bottomline. Net revenue for the quarter grew by 6.2% yoy to Rs 6.7 bn (Vs estimates of Rs 7.3 bn) with inline PVC pipes sales for the quarter, which stood at Rs 5.8 bn with 14.3% on yoy growth. Sales volume of PVC pipes business grew by 14.2% yoy and was inline with our estimates. The EBITDA margins improved by 360 bps yoy to 23.7% led by improved margins in the PVC resins business due to lower raw material prices. PAT for the quarter grew by 36% yoy to Rs 980 mn (Vs estimates of Rs 902 mn) on strong EBITDA margins and lower interest expenses. FIL management has maintained double digit revenue growth guidance in pipes business in FY17 based on 1) strong monsoon positively impacting demand in agri-pipes segment 2) strengthening distribution network across new geographies 3) focus on branding through customer engagement and 4) positive measures adopted by government in irrigation and infra sector. We believe that, FIL would be a major beneficiaries from government's focus on irrigation and any improvement in rural consumption led by normal monsoon. We maintain BUYrecommendation on the stock with revised target price of Rs 530 (Vs 504 earlier).
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