Company: Fineotex Chemicals
CMP: 326
Market Cap: 3700 cr
Revenue (FY24): 570cr
EBITDA margin: 26%
5 year average ROE: 25%
Net cash positive company; also recently done fund raise of 342.5cr
P/E: 31x (post dilution from warrant)
- Company is a chemical solutions provider for Textile & cleaning/hygiene segment, basically an specialty chemical company focused in this industry.
- Despite broad slowdown in chemical industry in last 2 years, company has been able to show consistent performance on the back of industry growth and providing innovative solutions. Last 3/5/10 years PAT CAGR is 41%/40%/35%.
- Company has recently raised 342.5cr through pref allotment (which includes 45cr from promoter) in 2 tranches with issue price of 346 & 387 per share (for reference current market price is lower than the price at which shares were issued to promoters / other investors)
- Fund raise is primarily to fund the inorganic opportunity which company is evaluating from last 2-3 quarters (target being in similar segments and of similar margin profile and is based outside of India) - should likely be announced in next 1-2 quarters
- Company currently has capacity of 104,000 tons and is doing CAPEX. In first phase which company is expecting to get live by Q1FY26, it would increase capacity by 18,000 and then will start next phase which should not more than 2 quarters (as land is already in place)
- company has given soft guidance of 28-30% growth for next 3-4 years
- As for all chemical companies, price fluctuation is a risk but company is able to pass on price increase to customers (as also reflected in numbers). Also, not much risk on product / raw material / customer concentration - top 10 product contribute 28% revenue, top 10 raw material dont contribute more than 20% of the total purchase cost, top 10 customers have not more than 30% of revenue
Overall, looks a decent opportunity to bet on the growth/ revival in textile & chemical sector with growth forecast of >25%, ROCE> 25% and available at reasonable valuation
Link of the thread: Fineotex Chemical Limited (FCL)
Transcript of Q2FY25 call: https://www.bseindia.com/xml-data/corpfiling/AttachHis/c8ae6933-ef00-4e1b-a851-5c89ce21d1ea.pdf