Stocks to Sell Today: On 7 November 2023, the financial services firm HDFC Securities published the latest research report on Fine Organic shares, assigning a ‘Sell’ rating to the stock. The comprehensive analysis also provides valuable insights into the company’s financial health.
HDFC Securities is Bearish on Fine Organic and has recommended a ‘Sell’ rating on the stock with a target price of Rs 3809. Let’s take a closer look at their recommendations for the Fine Organic share price target set by HDFC Securities.
Fine Organic Share Sell Recommendations
Fine Organics has received a SELL recommendation with a target price of INR 3,809 based on various factors such as the anticipation of long-term contract renewals, projected decreases in raw material and freight costs (which are expected to be transferred to customers), a delay in capacity expansion, weak demand in the US and European markets, and a significant drop in finished product prices.
The company’s financial performance in Q2 showed mixed results. Revenue saw a decrease both quarter-on-quarter and year-on-year by 1% and 41% respectively, dropping to approximately INR 5.4 billion. This decrease was largely due to a significant fall in exports (18% QoQ and 61% YoY), influenced by a lack of demand from the US and Europe, coupled with lower product realisations.
EBITDA for Q2 stood at INR 1.3 billion, marking a decline from previous quarters and the same period last year by 7.2% and 48.4% respectively, with the EBITDA margin eroding by 156 and 338 basis points quarter-on-quarter and year-on-year to 24.2%. However, Adjusted PAT (APAT) showed an increase by 3.6% quarter-on-quarter, though it fell by 49% year-on-year, reaching INR 1.33 billion.
During the conference call, several key points were highlighted:
- The company anticipates that the upcoming quarters will see renewals of long-term contracts and benefits from decreased raw material and freight costs will be extended to customers, leading to further adjustments in realisations.
- Exports, which now contribute 50% to total revenue in Q2FY24 (down from 68% in FY23), have suffered due to a decrease in demand from US and European markets, causing inventory buildup.
- All plants, except the Patalganga plant, are operating at optimal levels, supported by strong domestic demand.
- Fine Organics is planning an expansion with an application for land in an SEZ in Maharashtra and has also incorporated a subsidiary for operating within the SEZ.
- The domestic market showed solid growth in Q1FY24, and the company has relocated its R&D centre to streamline operations.
Taking into account these developments, forecast changes for FY24/25 EPS have been adjusted by +12/-1% to INR 130, reflecting the softening of demand and correction in realisations. The DCF-based valuation leading to the target price factors in a weighted average cost of capital (WACC) of 12% and a terminal growth rate of 6.0%. Currently, the stock trades at 32 times the FY25E EPS.
- CMP ā Rs. 4,268
- Target ā Rs. 3,809
- Type ā Sell
- Report ā Click Here
Shareholding Pattern
- Promoters: 75.00% (June 2023) and 75.00% (September 2023)
- FIs & Local MFs (Financial Institutions & Local Mutual Funds): 12.24% (June 2023) and 12.17% (September 2023)
- FPIs (Foreign Portfolio Investors): 3.78% (June 2023) and 3.78% (September 2023)
- Public & Others: 8.98% (June 2023) and 9.05% (September 2023)
Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on Sharedhan.com are their own, and not that of the website or its management. Sharedhan.com advises users to check with certified experts before making any investment decisions.
To stay updated with the latest information related to the stock market and receive live stock market updates, follow Sharedhan and stay connected with us. Check out Todayās Share Market Open or Closed.