Finolex Industries: Target Price Slashed to Rs228, But 'Accumulate' Rating Holds - Key Insights!

Prabhudas Lilladher released a research report on Finolex Industries, noting a 5.8% year-on-year decline in Pipes and Fittings (P&F) volumes for Q2FY26, attributed to an early and prolonged monsoon. Consequently, the firm has revised its volume growth guidance for FY26 from 10% down to a mid-single-digit percentage. The expected EBITDA margin range is now set between 10-12%. In Q2FY26, CPVC products contributed approximately 8% to the total volume, while fittings accounted for 12%. The company aims to balance its Agri:Non-agri product mix to 50:50 from the current 56:44. Prabhudas Lilladher projects revenue, EBITDA, and adjusted PAT CAGR of 9.7%, 15.7%, and 20.2% respectively for FY25-28, with a P&F volume CAGR of 9.6% and an EBITDA margin of 13.5% by FY28. The brokerage has downwardly revised its earnings estimates for FY27 and FY28 by 6.6% and 2.0%, respectively. Maintaining an 'Accumulate' rating, they have lowered the target price (TP) to Rs228 from Rs240, citing stock price correction and valuation of the Finolex Cables stake.

Impact This news has a moderate impact on Finolex Industries as it signals potential headwinds for near-term volume growth due to weather and revised earnings expectations. However, the maintained 'Accumulate' rating and long-term growth projections suggest continued investor interest. Impact Rating: 6/10

Definitions: * P&F (Pipes & Fittings): Refers to the products manufactured and sold by Finolex Industries, primarily pipes and fittings. * CPVC: Chlorinated Polyvinyl Chloride, a type of plastic used for hot and cold water plumbing systems. * Agri:Non-agri mix: The ratio of sales volume from agricultural applications versus non-agricultural applications (like construction and industrial uses). * CAGR (Compound Annual Growth Rate): The average annual growth rate of an investment over a specified period of time, greater than one year. * EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a measure of a company's operating performance. * Adj PAT (Adjusted Profit After Tax): Profit after tax that has been adjusted for any unusual or non-recurring items. * Target Price (TP): The price at which a stock analyst or brokerage firm believes a stock will trade in the future. * Accumulate Rating: An investment recommendation suggesting that investors should buy or add to their existing holdings of a particular stock.