Fine Organic gains 9%, hits new high; stock zooms 83% in one year

Shares of Fine Organic Industries hit a record high of Rs 4,318.05, surging 9.5 per cent on the BSE in Friday’s intra-day trade, outperforming the market with a wide margin. The stock of the specialty chemicals company surpassed its previous high of Rs 4,174.10 hit on February 4, 2022.

In the past one week and one month, the stock has gained 8 per cent and 15 per cent, respectively, as compared to a 3 per cent decline in the S&P BSE Sensex. Moreover, in the past six months, it has rallied 52 per cent as against a 0.18 per cent rise in the benchmark index. Moreover, over the past one year, the market price of Fine Organic has zoomed 83 per cent, as compared to a 9.8 per cent surge in the Sensex.

Fine Organic Industries carries on business in India and abroad as manufacturers, processors, suppliers, distributors, dealers, importers, exporters of wide range of oleochemical-based additives used in foods, plastics, cosmetics, coatings and other specialty application in various industries.

For the nine months ended December 2021 (9MFY22), the company reported a solid 56 per cent year-on-year (YoY) jumped in its consolidated net profit at Rs 137.8 crore on back of strong operational income. Revenue from operations grew 55 per cent YoY at Rs 1,259 crore.

Earnings before interest, taxes, depreciation, and amortization (ebitda) increased 37 per cent YoY at Rs 204.10 crore, while margins contracted 220 bps at 16.2 per cent. Fine Organic did not declare force majeure last year and serviced the clients by taking a margin hit and the management believes that the same decision has further strengthened their relationship with the clients.

The management highlighted that the current capacity is running at optimum utilization and with the addition of Patalganga Phase 2 expansion (likely in March’22), Fine Organic is in a position to utilize the entire capacity by the end of FY23 as against the earlier expectation of FY24.

The strong demand visibility is a function of resumption of business travel in select regions, addition of new clients and higher wallet share from few clients on a yearly basis. 

While, the company could pass on majority of the raw material and freight cost inflation, which is reflected in the improved margin performance in 3QFY22, availability issue still persists for select raw materials, analyst at Nirmal Bang Equities said in a result update.

The brokerage firm expects FY23 to be a very strong year in terms of earnings growth. However, due to lack of additional capacity, FY24 might be muted. The management indicated that new land in Gujarat would be finalized in the next 2 months and new plant is expected to take 20 months for commissioning. Also, the management is open for M&A opportunities across geographies. We continue to remain positive about the company’s long-term growth prospects, the brokerage firm said.