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Result Synopsis

FNXP’s Q1FY24 performance was largely in-line with our estimates wherein pipe division registered better than expected numbers, while resin segment crippled overall growth. Pipe segment’s volumes came in at 92,181Te, a growth of 28%YoY & 13%QoQ (notably, 4-year CAGR is flat). Strong demand from agri & plumbing segment aided the volume growth for plastic pipes. Drop in PVC resin prices lead to contraction in ASP from Rs135/Kg in previous quarter to Rs125/Kg in Q1FY24. Hence, pipe revenue came in at Rs11.54Bn, a growth of 2%YoY & 5%QoQ. However better volumes & lower fuel cost enabled FNXP to improve their EBIT/Kg to Rs13.7 in Q1FY24 from Rs11.1 in Q4FY23.

Resin segment disappointed on all fronts wherein volumes stood at 40,242Te, a sharp decline of 36%YoY & 38%QoQ. Company took maintenance shutdown for their PVC resin plant in April’23 which also weighed on volume growth. Realization contracted to Rs78/Kg as compared to Rs86/Kg in Q4FY23, revenue for the segment came in at Rs3.59Bn, a degrowth of 54%YoY & 28%QoQ. Profitability of segment was impacted due to sharp contraction in PVC-EDC & PVC-VCM delta. Hence, EBIT/Kg contracted to Rs0.7/Kg Vs Rs20.2/Kg in previous quarter.

We reckon that pipe division will deliver sturdy volume growth owing to strong industry tailwinds aided by higher government spends, hence we expect pipe volume growth of 15%CAGR over FY23-FY25E. However, resin segment is likely to remain under pressure & therefore we do not foresee any volume growth from the same. Hence, we maintain our EPS estimates for FY25E at Rs9.4 & continue to value the company at P/E(x) of 15x on FY25E EPS, maintaining our SELL rating on the stock with a target price of Rs140.

Result Highlights

* Revenue from the quarter stood at Rs 11.79Bn (V/s our est of Rs11.12Bn), reporting a growth of 3%QoQ & flattish YoY (above our estimates by 6%)

* EBITDA Margin came in at 12.9% (V/s our est of 13.6%) as compared to 11%/19.1% in Q1FY23/ Q4FY23 respectively. Absolute EBITDA stood at Rs1.52Bn, growth of 21%YoY & degrowth of 30%QoQ.

* PAT stood at Rs1.15Bn, growth of 16%YoY & decline of 31%QoQ.

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