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Result Synopsis

FNXP registered strong volumes of 81,312Te, a degrowth of 10%YoY (high-base) & a robust growth of 29%QoQ (3-year CAGR stood at 14%), driven by plumbing & sanitation pipes. Pipes ASP declined to Rs122/Kg from Rs136/Kg in the previous quarter owing to fall in PVC resin prices. Consequently, EBIT/Kg came in at Rs9.1 as against Rs10.7 in Q2FY24. Resin biz continued to remain under pressure wherein volumes declined by 32%YoY & grew by 17%QoQ (low base). The ASP of this segment stood at Rs73/Kg, a decline of Rs6/Kg on sequential basis. EBIT/Kg came in at Rs7.1 Vs Rs5.4 in the previous quarter. Overall EBITDA margins remained flattish on a sequential basis at 11.8%.

We believe with strong industry tailwinds, FNXP should register a decent volume growth of 13%CAGR over FY23-FY26E. Moreover, with the company’s focus on expanding the contribution of plumbing segment, the profitability should also improve. We reckon EBITDA margins to improve to 12.4% by FY26E, hence overall EBITDA is likely to grow by 35%CAGR over FY23-FY26E. At CMP, the stock trades at a rich P/E(x) of 27.2x/25.1x on FY25E/FY26E EPS of Rs8.5/Rs9.2. We continue to value the company at a P/E(x) of 20x on FY26E EPS, arriving at a target price of Rs185, maintaining our SELL rating on the stock.

Result Highlights

? Company reported revenue of Rs10.2Bn, a degrowth of 9%YoY & a growth of 15.5%QoQ. Pipes revenue came in at Rs9.9Bn, decline of 8%YoY & an increase of 16%QoQ. PVC resin revenue stood at Rs3.2Bn, a steep fall of 36%YoY & an increase of 8%QoQ.

? Pipes volumes stood at 81,312Te, a decline of 10%YoY and an increase of 29%QoQ (3-year CAGR stood at 14%). PVC resins volumes stood at 43,738Te, a decrease of 32%YoY and an increase of 17%QoQ (3-year CAGR stood at -14%).

? Pipes ASP came in at Rs122/Kg as compared to Rs119/Rs136 in Q3FY23/Q2FY24 respectively. Resins ASP came in at Rs73/Kg Vs Rs78/Rs79 in Q3FY23/Q2FY24 respectively.

? Pipes EBIT/kg for the quarter stood at Rs9.1 Vs Rs7.6/Rs10.7 in Q3FY23/Q2FY24. Resin’s EBIT/kg stood at Rs7.1 Vs Rs1.9/Rs5.4 in Q3FY23/Q2FY24 respectively.

? Net profit stood at Rs954Mn, a growth of 20%YoY & marginal decline of 2.5% on sequential basis which was largely on account of reduction in other income which stood at Rs351Mn Vs Rs614Mn in previous quarter.

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