Buy Finolex Industries; target of Rs 190: ICICI Securities

What happened

Finolex Industries reported 27.7% year-on-year pipe volume growth for Q2FY27, helped partly by channel restocking as PVC prices rose. Profit per kilogram in the pipe segment fell 25.2% to INR 14.9, cutting overall EBITDA by 4.5%. ICICI Securities kept a BUY rating with a target of Rs 190.

Confirmed

Global impact / market context

Higher pipe volumes show demand is recovering, but falling profit per kilogram means each sale earns less because raw material costs rose. ICICI Securities cut its target to Rs 190 from Rs 214 and lowered the valuation multiple for the pipe business, citing more volatile earnings.

Analyst inference

The analyst expects Q4 to be the strongest quarter as farm demand returns, and management guides profit per kilogram of about INR 14-15 for FY27. A lower valuation multiple for the pipe business shows the analyst is paying less for each rupee of earnings.

Analyst inference

What to watch

1. Watch whether Finolex Industries achieves its guided pipe segment profit of about INR 14-15 per kilogram in FY27, after Q2FY27 came in at INR 14.9. Confirmed
2. Track whether Q4 becomes the strongest quarter as management expects, with agricultural demand resuming, since this supports the improved volume outlook behind the BUY rating. Proposed
3. Monitor PVC price direction and raw material costs, because they drive profit per kilogram; further volatility could justify another cut to the valuation multiple used for the pipe business. Analyst inference

Evidence

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