Nirmal Bang Feb'24
Nirmal Bang Feb'24
52 Wk H / L (Rs):
Maharashtra SEZ capacity is the key.
ADTV-3M (mn) (Rs/US$): 245.9 / 2.8
FINEORG remains our top BUY idea (please refer our Oleochemicals Stock performance (%) 1M/6M/1yr: (5.3) / (4.0) / (10.1)
sector thematic report). Maintain BUY (40x PE on Dec’25E). Nifty 50 performance (%) 1M/6M/1yr: 0.4 / 11.8 / 24.1
Domestic demand strong; at least 1 more quarter of pain for US & Shareholding 1QFY24 2QFY24 3QFY24
Europe: Underlying demand in the domestic market is satisfactory and is Promoters 75.0 75.0 75.0
expected to partially offset the softness in overseas markets. The DIIs 12.2 12.2 11.9
management indicated that domestic demand is primarily driven by the Foods FIIs 3.8 3.8 3.6
segment; but, other areas such as Cosmetics, Paints & Coatings, etc. are also Others 9.0 9.1 9.6
catching up. Overseas markets, which dominated growth in FY23 (~68% Pro pledge 0.0 0.0 0.0
revenue share), are now struggling due to weak macroeconomic environment Financial and Valuation Summary
in the US and Europe. Exports’ revenue share declined to ~49% (revenue Particulars (Rsmn) FY23 FY24E FY25E FY26E
declined by ~55% YoY) in 3QFY24. Net Sales 30,231 20,460 21,468 24,678
Growth YoY% 61.1 -32.3 4.9 15.0
Update on expansion: The management indicated that Thailand JV capacity
Gross margin % 41.0 41.9 41.8 41.8
is ready for commissioning post 2 pending approvals. As far as expansion in
EBITDA 8,311 5,106 5,572 6,404
Maharashtra SEZ is concerned, the management expects final go-ahead for
EBITDA margin % 27.5 25.0 26.0 26.0
land allotment in Mar’24. Post completion of EC, the new capacity spread over Adj PAT 6,181 3,889 4,120 4,773
30 acres can take 18-24 months for commissioning. Since SEZ facility is Growth YoY% 138.1 -37.1 5.9 15.8
expected to focus mainly on export demand, some products from the existing Adj. EPS 201.6 126.9 134.4 155.7
facilities might get shifted there. RoCE (pre-tax)% 60.6 26.4 24.1 23.2
RoCE% 44.5 19.8 17.2 16.6
Update on competition: On our question regarding competition getting
RoE% 49.4 22.9 20.4 20.1
aggressive, the management highlighted that each company has its own
P/E 21.6 34.4 32.4 28.0
niche and overall opportunity is very big for all the players. We highlight that EV/EBITDA 15.5 24.1 21.5 18.5
Croda has announced an Rs5bn capex in Dahej. Palsgaard has incorporated P/BV 8.7 7.2 6.1 5.2
a new subsidiary in India during 2023. Riken Vitamin is planning to start its Source: Bloomberg, Company, Nirmal Bang Institutional
new application lab in the US during CY24. Equities Research
came broadly in line with our estimates. Overall volume reduction was mainly 3QFY24 Presentation
on account of weakness in the US and European markets whereas the rest
of the export geographies have been holding up well for FINEORG. Gross
margin improvement of 938bps/42bps YoY/QoQ was a function of mix change
and lower RM prices. The management indicated that majority of capacities Please refer to the disclaimer towards the end of the
(except Patalganga) were running at optimum utilisation levels. document.
Abhishek Navalgund
Research Analyst
[email protected]
+91-22-6273-8089
Institutional Equities
Exhibit 1: Mix shifting in favor of domestic portfolio during FY24 due to slowdown in the US
and Europe
100%
45% 43% 46% 357% 48% 42% 45% 45% 38% 46% 47% 48% 37% 42% 43% 38% 30% 30% 30% 40% 46% 50% 51%
90%
80%
70%
70% 70% 70%
60%
62% 63% 62%
58% 58% 57% 60%
50% 55% 57% 54% 434% 55% 55% 54% 53% 52% 54%
52% 50% 49%
40%
30%
20%
10%
0%
1QFY23
3QFY23
1QFY24
3QFY24
1QFY19
2QFY19
3QFY19
4QFY19
1QFY20
2QFY20
3QFY20
4QFY20
1QFY21
2QFY21
3QFY21
4QFY21
1QFY22
2QFY22
3QFY22
4QFY22
2QFY23
4QFY23
2QFY24
Export Share Domestic Share
200%
155.0%
150% 125.8% 132.4%
100.3%
100% 71.0% 68.6%
51.4%
50% 7.5% 24.6% 52.6% 69.6%
-4.3% 4.6% 3.2% 14.2% -6.7% 45.1% 50.8% 39.5% 48.2% -6.7%
37.9%
0% 18.5% 12.2%
9.8%
8.0% -0.9% 15.1% -1.9%
1.1% 6.6% 2.3%
-24.2%
-50% -43.5%
-58.0% -55.2%
-89.0%
-100%
-150%
3QFY24
1QFY20
2QFY20
3QFY20
4QFY20
1QFY21
2QFY21
3QFY21
4QFY21
1QFY22
2QFY22
3QFY22
4QFY22
1QFY23
2QFY23
3QFY23
4QFY23
1QFY24
2QFY24
Export Growth Domestic Growth
50%
45%
40%
35%
30%
25%
20%
15%
10%
4QFY20
1QFY24
1QFY19
2QFY19
3QFY19
4QFY19
1QFY20
2QFY20
3QFY20
1QFY21
2QFY21
3QFY21
4QFY21
1QFY22
2QFY22
3QFY22
4QFY22
1QFY23
2QFY23
3QFY23
4QFY23
2QFY24
3QFY24
Source: Company, Nirmal Bang Institutional Equities Research Source: Company, Nirmal Bang Institutional Equities Research
Exhibit 8: Revenue growth - we are building in ~7% Exhibit 9: EBITDA growth - we are building in ~15%
CAGR over FY22-FY26E CAGR over FY22-FY26E
(Rsmn) (%) (Rsmn) (%)
35,000 80 9,000 128.0 140
65.6
61.1 70 8,000 120
30,000 60
7,000 82.9 100
50
25,000 80
40 6,000
20,000 30 60
15.0 5,000
9.2 20 40
4.9 4,000 14.9
15,000 10 9.1
20
0 3,000
10,000 0
-10
2,000 -38.6 -20
5,000 -32.3 -20 -17.1
-30 1,000 -40
- -40 - -60
FY21 FY22 FY23 FY24E FY25E FY26E FY21 FY22 FY23 FY24E FY25E FY26E
Revenue Growth YoY (%) EBITDA Growth YoY (%)
Source: Company, Nirmal Bang Institutional Equities Research Source: Company, Nirmal Bang Institutional Equities Research
Exhibit 10: APAT growth we are building in ~16% CAGR Exhibit 11: ROIC trend – expect average ROICs to be in
over FY22-FY26E excess of 40% over next 2 years
(Rsmn) (%) 75.0%
7,000 180
138.1 62.9%
6,000 150 65.0%
115.8
120
5,000 55.0%
90
4,000 44.9%
43.1%
60 45.0%
37.6%
3,000 15.8 35.7%
5.9 30 35.0% 31.3%
2,000 28.3% 27.1%
-27.0 0 25.7%
23.8%
-37.1 25.0% 22.4% 22.2% 21.4%
1,000 -30
- -60 15.0%
FY25E
FY15
FY14
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23
FY24E
FY26E
Source: Company, Nirmal Bang Institutional Equities Research Source: Company, Nirmal Bang Institutional Equities Research
Rating Chart
272
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
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Jul-21
Jul-22
Jul-23
Mar-22
Mar-23
Dec-21
Feb-22
Dec-22
Feb-23
Dec-23
Feb-24
Sep-21
Sep-22
Apr-21
Oct-22
Sep-23
May-21
Oct-21
May-22
May-23
Oct-23
NBEPL has other business divisions with independent research teams separated by Chinese walls, and therefore may, at
times, have different or contrary views on stocks and markets.
NBEPL or its associates have not been debarred / suspended by SEBI or any other regulatory authority for accessing /
dealing in securities Market. NBEPL, its associates or analyst or his relatives do not hold any financial interest in the subject
company. NBEPL or its associates or Analyst do not have any conflict or material conflict of interest at the time of publication
of the research report with the subject company. NBEPL or its associates or Analyst or his relatives do not hold beneficial
ownership of 1% or more in the subject company at the end of the month immediately preceding the date of publication of
this research report.
NBEPL or its associates / analyst has not received any compensation / managed or co-managed public offering of securities
of the company covered by Analyst during the past twelve months. NBEPL or its associates have not received any
compensation or other benefits from the company covered by Analyst or third party in connection with the research report.
Analyst has not served as an officer, director or employee of Subject Company and NBEPL / analyst has not been engaged
in market making activity of the subject company.
Analyst Certification: I, Abhishek Navalgund, research analyst the author of this report, hereby certify that the views
expressed in this research report accurately reflects my/our personal views about the subject securities, issuers, products,
sectors or industries. It is also certified that no part of the compensation of the analyst was, is, or will be directly or indirectly
related to the inclusion of specific recommendations or views in this research. The analyst is principally responsible for the
preparation of this research report and has taken reasonable care to achieve and maintain independence and objectivity
in making any recommendations.
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