Result Review for Fine Organic Industries and Sadbhav Engineering

  • Stock Market Analysis
  • Editors Pick

Fine Organic Industries Ltd (BO: FINO ): Our BUY recommendation on Fine Organic Industries (FOIL) with a target price of INR 4,220 is premised on (1) constant focus on R&D, (2) diversified product portfolio, (3) capacity-led expansion growth opportunity, and (4) leadership in oleo-chemical based additives in the domestic and global markets with a loyal customer base. We expect FOIL’s PAT to grow at a 41% CAGR over FY22-24E, led by a 36% CAGR in EBITDA. In the absence of any major Capex in the coming years, the RoCE would expand from 20% in FY22E to 29% in FY24E. Q2 EBITDA/APAT was 26/37% above our estimates, owing to a 22% rise in revenue, lower-than-expected raw material costs, lower-than-expected depreciation, and higher-than-expected other income.

Sadbhav Engineering (NS: SADE ): Sadbhav Engineering (SEL) continued its weak operating performance in Q2 as revenue/EBITDA, at INR 2.6/0.35bn, were a (miss)/beat of (6.3)/31%. It reported an exceptional loss of INR 50mn on the sale of fixed assets. SEL has been caught in a tightened liquidity conundrum and is in the midst of deleveraging through asset monetisation (INR17-18bn). Execution pick-up is contingent on the same. We await progress on the monetisation of Ahmedabad ring road and three HAM assets along with the remaining 2.5% stake sale in Indinfravit trust. Further, proceeds from Maharashtra border check post and arbitration claims shall aid deleveraging. Given the slower-than-expected recovery in execution & monetisation and high commodity prices, we have cut our estimates. We downgrade our rating to ADD (from BUY) with a reduced TP of INR 47/sh.

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