IGI Logo

Steady performance, expansion plans progressing

Quick Pointers:

* EC obtained for the new SEZ plant, construction to complete in 18 months post inception

* New subsidiaries in USA to set up a manufacturing facility in the USA and UAE to enhance supply chain efficiency respectively

Fine Organic (FINEORG IN) reported a consolidated revenue of Rs6bn, reflecting a growth of 11% YoY and 18% QoQ. This was driven by an 18% sequential increase in both domestic and export revenues. However, the sharp rise in vegetable oil prices, key raw materials for the company led to a significant YoY decline in gross margin to 19.7%, RM prices are expected to stabilize going forward. All the company's manufacturing plants are operating at full capacity, except for the Patalganga facility (food grade), which is currently in the ramp-up phase. Fine Organic is establishing new subsidiaries in the USA and UAE to set up a manufacturing plant and improve supply chain efficiencies, respectively. The company has also received environmental clearance for its Rs7.5bn greenfield capex project on SEZ land. Construction is expected to commence soon and will take 18 months to complete from the start date. We believe this new facility will be a key driver for future growth, with a projected peak revenue potential of Rs26bn, based on an asset turnover of 3.5x. It is expected to meaningfully contribute to the topline starting FY28. At the current valuation, FINEORG is trading at ~24x FY27E EPS. We maintain our ‘BUY’ rating with a revised target price of Rs4,930, based on 29x FY27E EPS

* Consolidated revenue increased 18% QoQ: Consolidated revenue stood at Rs6bn (11% YoY/ 18% QoQ) (PLe: Rs5.2bn, Consensus: Rs5.2bn). FY25 revenue for the company improved by 7% to Rs22.7bn. Domestic and export sales accounted for 44% and 56% of revenue, respectively in Q4FY25. Export revenue increased 18% QoQ. Standalone revenue at Rs5.7bn increased 10% YoY and QoQ.

* Rise in input cost led to decline in gross margin by 450bps YoY: Gross margin was at 39.6% (vs 44.1% in Q4FY24 and 39.4% in Q3FY25). Absolute Gross profit was Rs2.4bn, increased QoQ by 19% due to modest decrease in raw material cost. EBITDA came in at Rs1,196mn (-17% YoY/ 21% QoQ), (PLe: Rs950mn, Consensus: Rs1,222mn) and EBITDA margin came at 19.7% (vs 26.2% in Q4FY24 and 19.3% in Q3FY25).

* Key concall highlights: (1) RM prices expected to stabilize going forward. (2) EC obtained for the new SEZ plant, few other regulatory requirements to be obtained soon. (3) Construction of the new plant to begin soon and will be completed in 18 months post inception, total capex for this plant will be Rs7- 7.5bn. (4) Subsidiary in USA to set up a manufacturing facility, it will cater to local clients in South America and North America. (5) Open for inorganic opportunities, additional cash will be utilized for M&A opportunities in pipeline. (6) Trial production in Thailand JV started, Thai FDA approval received. (7) For large customers contracts are generally 12 months long. (8) Patalganga plant, which is exclusively for food additives is currently in ramp up phase, it is expected to utilized fully by Q1FY27.

Above views are of the author and not of the website kindly read disclaimer