This Ashish Kacholia-owned chemical stock has zoomed 100% in two months

The company is witnessing rise in demand from end-user industries such as food processing, personal care and home care in the specialty chemicals market.

Shares of Fineotex Chemicals continued their northbound movement and hit a new high at Rs 409.45 on the BSE as stock surged 9 per cent in Tuesday’s intra-day trade backed by strong business outlook. In the past two months, the share price of the specialty chemicals company has doubled from a level of Rs 202.95 on July 14.

In the past one month, the stock has soared 57 per cent after the company reported a strong set of numbers for the quarter ended June 2022 (Q1FY23). In comparison, the S&P BSE Sensex was up 1.7 per cent during the period. Further, in the past three months, the stock has zoomed 156 per cent, as against 14 per cent gain in the benchmark index.

Investor Ashish Kacholia held 2.14 million equity shares or 1.93 per cent stake in Fineotex Chemicals as on June 30, 2022, the shareholding pattern data shows.

Fineotex Chemicals is engaged in the business of manufacturing of textile chemicals, auxiliaries and specialty chemicals. The textile industry is the largest consumer of the company’s specialty chemicals. The company has major textile brands as trusted customers and product quality have a good brand recall. The company’s export portfolio includes more than 60 nations.

On sudden spurt in stock price of the company, Finotex Chemicals clarified that at present the board of the company has not taken any decision impact on the movement in price. Further, the company has declared its yearly and quarterly positive result in the month of April and July respectively, which has positively impacted in the market, the company said.

Therefore, the movement in Company's share price is purely due to market conditions and apparently market driven and the management or the Company has no control over it and in no way connected with movement in price of shares, it said.

In Q1FY23, Fineotex Chemicals reported 115 per cent year-on-year (YoY) jump in its consolidated revenue at Rs 135.8 crore. Earnings before interest, taxes, depreciation, and amortization (ebitda) grew 167 per cent YoY at Rs 26.20 crore., while margin expanded 381 bps YoY to 19.3 per cent. The company’s consolidated profit after tax rose 110 per cent YoY at Rs 20.3 crore.

The rise in demand from end-user industries such as food processing, personal care and home care is driving development of different segments in India’s specialty chemicals market. The domestic chemicals sector’s small and medium enterprises are expected to showcase 18- 23 per cent revenue growth in FY22, owing to an improvement in domestic demand and higher realisation due to high prices of chemicals. The Government of India’s a production-linked incentive (PLI) scheme in the chemical sector will boost domestic manufacturing and exports.

Many specialty chemicals companies are expanding their capacities to cater to these rising demands and with global companies seeking to derisk their supply chains, which are dependent on China, the domestic sector has the opportunity for a significant growth. The recent COVID incidences in China and the measures undertaken to control it, has affected the supply chain, Fineotex Chemicals said in FY22 annual report.

Technical View

Bias: Positive

Support: Rs 358

Target: Rs 420, Rs 450

Fineotex Chemical is currently treading along the higher-end of the Bollinger Band on the daily chart, while above the higher-end of the Bollinger Band on the weekly chart.

The select key momentum oscillators, both, on the daily and the weekly charts - like the MACD, Directional Index and Slow Stochastic are strongly in favour of the bulls.

As per the weekly chart, the overall bias is likely to remain bullish as long as the stock holds above Rs 358. On the upside, the stock is trading in unchartered territory and may test Rs 420-450, indicates the monthly Fibonacci chart.

(With inputs from Rex Cano)