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Incorporated in 2004, Fineotex Chemical Ltd is a specialty chemicals producer and mainly caters to segments such as – i) Textile chemicals and ii) Cleaning & hygiene. Recently, it has forayed into drilling specialty chemicals for oil & gas. It has established strategic partnerships with EuroDye, HealthGuard, and Sasmira to further enhance its market presence and offer customized technical solutions through its dedicated focus on R&D.

Outperformed overall industry in terms of volumes and profitability

* The company has delivered healthy volume growth of ~25% for FY24. Company’s textiles chemicals segment witnessed 20% volume growth while cleaning and hygiene segment saw volume growth of ~25%.

* While the industry players have faced challenges in terms of optimizing or sustaining operating leverage due to various macro events such as Ukrain – Russia war, Red sea issue, etc., Fineotex has been able to generate growth in both volume as well as in value terms. Company’s revenue has grown at 24% CAGR between FY22- 24 and operating margins improved from the 19.3% in FY22 to 26.1% levels in FY24.

Efficient operational capabilities with sustained return ratios

* Company mainly focuses on sustainable products and it has received ESG badge from Dun & Bradstreet. This recognition highlights company’s commitment towards sustainability. Change in product mix, new product launches, cost saving measures along with improved working capital cycle has helped Fineotex deliver healthy financials with sustained margins. With this, it has generated healthy return ratios i.e. ROCE at 34.3% and ROE at 29.9% for FY24.

Expansion through organic as well as inorganic route is expected to drive business growth

* Fineotex is expanding its capacity in a phased manner where phase I expansion is expected to be completed by FY25 end which will add 20K MTPA and further phase II expansion of 20K MTPA is planned. It is in advanced stage of an international acquisition for which it has already raised funds worth Rs. 120 cr in May’24.

Peer Analysis

In terms of topline growth between FY20-24, Fineotex has grown ahead of many leading players. High revenue growth of Rossari Biotech is on account of inorganic growth. It has also outperformed in terms of profitability with 26.1% of EBITDA margin in FY24 compared to 14.9% of average of peer performance. Additionally, it has delivered healthy return ratios when compared with its peers. Despite its healthy financial performance, Fineotex is valued at the similar valuation when compared with its peers. We expect re-rating of the stock on account of its strong growth drivers.

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SEBI Registration number is INH000001766