Buy Fineotex Chemical Limited For Target Rs. 51.0 by Choice Institutional Equities Ltd
CCT Unlocks Access to the USD 11.5 Bn NA Oilfield Chemicals Market
FTXC’s acquisition of a 53% stake in CrudeChem Technologies (CCT) provides direct access to the USD 11.5 Bn North American oilfield-chemicals market and materially expands its addressable opportunity. CCT’s full-suite solution model, comprising localised manufacturing, customised formulations, on-site technical support and last-mile delivery, enables faster response times and minimises costly well downtime. We believe this creates high entry barriers and strong customer stickiness. Since the acquisition in Dec ’25, CCT’s installed capacity has increased from ~80K MTPA to ~140K MTPA in June ’26. We forecast utilisation to ramp up towards 70–80%, supported by overtime and additional shifts, customer addition and wallet-share gains. We anticipate CCT to contribute to FTXC’s top line by INR 12.8 Bn in FY27E and INR 16.5 Bn in FY28E, implying a consolidated revenue CAGR of ~47.3% over FY26-29E.
Core Portfolio & CCT Operating Leverage to Drive ~425 bps Margin Expansion
FTXC’s core textile and specialty-chemicals portfolio remains a high-margin earnings anchor. Its focus on key chemistries, customised formulations and diversified end markets supports pricing power and customer retention. We expect improving textile demand across Europe, the UK and the US, alongside continued scale-up in FMCG, cleaning & hygiene chemical segment, to support steady core business growth. At CCT, higher utilisation, larger batch sizes, better procurement and lower financing cost should drive operating leverage. We anticipate these gains will partly offset the rising contribution from the lower-margin oil & gas business. Therefore, we forecast consolidated EBITDA margin to improve from ~13.9% in Q4FY26 to ~18.2% in FY29E, an expansion of ~425 bps.
Cash-rich Balance Sheet Supports M&A-led Platform Expansion
FTXC’s debt-free balance sheet and cash and investments of over INR 3.6 Bn provide flexibility to fund working capital, brownfield expansion and strategic acquisitions. We see capital deployment opportunities across oilfield production chemicals and water-treatment chemicals, including data centres, semiconductors, desalination and effluent treatment. We expect FTXC to acquire additional 25% stake in CCT in Jan ’28E for ~INR 2.9 Bn, further increasing its economic interest in the business. Robust earnings growth, margin improvement at CCT and disciplined capital allocation expected to support a 42.2% Att. PAT CAGR over FY26–FY29E and lift ROIC to ~27.2% by FY29E.
Optionality: Acquisitions in water treatment, oilfield production chemicals and new geographies are expected in next 9-12 months
Investment View: Driven by CCT’s capacity ramp-up, operating leverage in the oil & gas business, steady growth in the core portfolio and disciplined capital deployment, we expect Revenue / EBITDA / Att. PAT to expand at a CAGR of 47.3% / 49.3% / 42.2% over FY26-FY29E. We, therefore, initiate coverage with a ‘BUY’ rating and a TP of INR 51, indicating an upside of 27.7%, based on our DCF valuation. Our valuation implies a P/E of 24.5x on FY28E EPS and a PEG of 0.7x, considering an EPS CAGR of 42.2% over FY26-FY29E.
Key Risks: Probable slower-than-expected CCT ramp-up, possible slowdown in US drilling and production activity and probably renewed escalation in West Asia tension. Given foregoing risks, our bear-case valuation implies a downside of 27.5%.
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