Finolex's net profit for the quarter ramps up by 121.68% to Rs. 502.03 million from Rs. 226.47 million, when compared with the prior year period. Investors are recommended to buy the stock for a price target of Rs319 for medium to long term investment.

1. CMP 279.90
Target Price 319.00
ISIN: INE183A01016
JULY 28th
2014
FINOLEX INDUSTRIES LTD
Result Update (PARENT BASIS): Q1 FY15
BUYBUYBUYBUY
Index Details
Stock Data
Sector Plastic products
BSE Code 500940
Face Value 10.00
52wk. High / Low (Rs.) 302.75/99.00
Volume (2wk. Avg.) 27000
Market Cap (Rs. in mn.) 34734.19
Annual Estimated Results (A*: Actual / E*: Estimated)
YEARS FY14A FY15E FY16E
Net Sales 24530.31 27228.64 29406.93
EBITDA 4402.95 4701.66 5155.66
Net Profit 1701.47 2090.30 2403.34
EPS 13.71 16.84 19.37
P/E 20.41 16.62 14.45
Shareholding Pattern (%)
1 Year Comparative Graph
FINOLEX INDUSTRIES LTD S&P BSE SENSEX
SYNOPSIS
Finolex Industries Limited (FIL) is India’s largest
rigid PVC pipes and fittings manufacturer and
the second largest PVC resin manufacturer.
During the quarter, net sales registered 17.61%
increase and stood at a record Rs. 6627.20
million from Rs. 5634.93 million over the
corresponding quarter last year.
Net profit for the quarter ramps up by 121.68%
to Rs. 502.03 million from Rs. 226.47 million,
when compared with the prior year period.
Earnings per Share for the company were Rs.
4.05 compared to Rs. 1.82 in Q1 FY14, registered
121.68% increase.
During Q1 FY15, PVC pipe and fittings segment
increase by 25% to Rs.5437.94 million from Rs.
4349.18 mn over the corresponding quarter of
the previous year.
The company has recently set up a dedicated
warehouse at Cuttack, Odisha to cater to the ever
increasing demand for the company’s products
from East and North-East India.
In Q1 FY15, EBIDTA is Rs. 1298.09 million as
against Rs. 1140.17 million in the corresponding
period of the previous year.
Net Sales and PAT of the company are expected
to grow at a CAGR of 11% and 21% over 2013 to
2016E respectively.
PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND
Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)
Finolex Industries Ltd 279.90 34734.19 13.71 20.41 4.40 70.00
Supreme Industries 599.95 76209.8 22.15 27.09 7.03 300.00
Nilkamal 361.40 5393.0 26.83 13.47 1.15 40.00
Sintex Inds 87.95 29076.0 10.14 8.67 0.96 0.00

2. QUARTERLY HIGHLIGHTS (PARENT BASIS)
Results updates- Q1 FY15,
Months June-14 June-13 % Change
Net Sales 6627.20 5634.93 17.61
PAT 502.03 226.47 121.68
EPS 4.05 1.82 121.68
EBITDA 1298.09 1140.17 13.85
The company net profit jumps to Rs. 502.03 million against Rs. 226.47 million in the corresponding quarter
ending of previous year, an increase of 121.68%. The company achieved a turnover of Rs. 6627.20 million
registering an increase of 17.61% for the 1st quarter of the current year 2014-15 as against Rs. 5634.93 millions
in the corresponding quarter of the previous year. Reported earnings per share of the company stood at Rs. 4.05
a share during the quarter as against Rs. 1.82 over previous year period. Profit before interest, depreciation and
tax is Rs. 1298.09 million as against Rs. 1140.17 million in the corresponding period of the previous year.
Break up of Expenditure
Particulars
Rs. million
Q1 FY15 Q1 FY14
Cost of materials consumed 3775.64 4106.12
Employee benefits expense 190.89 167.22
Depreciation and amortization
expense
149.04 146.45
Power and fuel 262.43 252.81
Other expenditure 482.27 439.09

3. Segment Revenue
Latest Updates:
• The company has recently set up a dedicated warehouse at Cuttack, Odisha to cater to the ever increasing
demand for the company’s products from East and North-East India.
COMPANY PROFILE
Finolex Industries Limited (FIL) is India’s largest rigid PVC pipes and fittings manufacturer and the second
largest PVC resin manufacturer. FIL head office is based out of Pune, with manufacturing plants in Pune,
Ratnagiri in Maharashtra and Vadodara in Gujarat. Finolex pipes and fittings are available in every state of the
country and are sold through a network of dealers, subdealers and retailers.
Products
PVC-U Pipes & Fittings
FIL is the largest PVC-U pipe manufacturer in India and the first to have been awarded the IS/ISO 9001:2000
certification. FIL offers a wide range of PVC-U pipes and fittings, for diverse applications in agriculture, housing,
telecom etc. ranging between 20 mm to 400 mm diameter.
PVC Resin
PVC is a thermoplastic resin, which in versatility of processing and application surpasses all other thermoplastic
materials. Today, PVC finds applications in insulation of cables, in pipes and hoses, agricultural products,
windows and profiles, flooring tiles used in the building industry, blister packaging, films and sheets, foamed
leather cloth, curtains, tarpaulins, and also for medical use - for IV, blood bags, etc.

4. Chemicals
Finolex is actively trading in Ethylene Di Chloride and Methanol catering to various industries in the country.
These products are used as solvents in the Pharma, Fertilizer, Paints, Lamination, Amines and various other
industries in India.

5. FINANCIAL HIGHLIGHT (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions)
Balance Sheet as at March 31, 2013 -2016E
FINOLEX INDUSTRIES LTD FY13A FY14A FY15E FY16E
SOURCES OF FUNDS
Shareholder's Funds
Share Capital 1240.87 1240.95 1240.95 1240.95
Reserves and Surplus 5970.76 6655.93 8863.59 10193.13
1. Sub Total - Net worth 7211.63 7896.88 10104.54 11434.08
Non Current Liabilities
Long term Borrowings 1397.09 2322.09 2600.74 2808.80
Deferred Tax Liabilities [Net] 936.35 1063.25 1148.31 1205.73
Other Long Term Liabilities 4.68 4.37 4.63 4.86
Long Term Provisions 136.51 80.65 84.68 93.15
2. Sub Total - Non Current Liabilities 2474.62 3470.36 3838.36 4112.54
Current Liabilities
Short Term Borrowings 5709.22 4237.12 3474.44 2988.02
Trade Payables 1841.18 1114.29 980.57 1019.80
Other Current Liabilities 1973.19 1369.36 1232.42 1299.92
Short Term Provisions 796.75 1021.78 1154.61 1258.52
3. Sub Total - Current Liabilities 10320.33 7742.54 6842.04 6566.26
Total Liabilities (1+2+3) 20006.58 19109.79 20784.95 22112.88
Non-Current Assets
a) Fixed Assets 9301.32 9376.80 10126.94 10633.29
b) Other non-current assets 4.08 328.09 377.30 422.58
c) Non-current investments 1274.04 1274.04 1375.96 1458.52
d) Long Term loans and advances 196.52 193.22 208.68 219.11
1. Sub Total - Non Current Assets 10775.96 11172.15 12088.89 12733.50
Current Assets
Current Investments 2322.05 940.50 1053.36 1148.16
Inventories 4827.78 5059.46 5413.62 5738.44
Trade receivables 387.20 409.88 442.67 464.80
Cash and Bank Balances 90.48 209.19 271.95 331.77
Short-terms loans & advances 1603.10 1318.61 1514.46 1696.20
2. Sub Total - Current Assets 9230.62 7937.64 8696.06 9379.37
Total Assets (1+2) 20006.58 19109.79 20784.95 22112.88

6. Annual Profit & Loss Statement for the period of 2013 to 2016E
Value(Rs.in.mn) FY13A FY14A FY15E FY16E
Description 12m 12m 12m 12m
Net Sales 21448.21 24530.31 27228.64 29406.93
Other Income 333.70 436.80 345.08 362.33
Total Income 21781.91 24967.11 27573.72 29769.26
Expenditure -17860.78 -20564.16 -22872.06 -24613.60
Operating Profit 3921.13 4402.95 4701.66 5155.66
Interest -514.49 -663.72 -876.11 -1016.28
Gross profit 3406.64 3739.24 3825.55 4139.38
Depreciation -544.16 -622.92 -685.21 -740.03
Exceptional Items -960.92 -697.70 -166.94 0.00
Profit Before Tax 1901.56 2418.62 2973.40 3399.35
Tax -540.20 -717.15 -883.10 -996.01
Net Profit 1361.36 1701.47 2090.30 2403.34
Equity capital 1240.95 1240.95 1240.95 1240.95
Reserves 5970.76 6655.93 8863.59 10193.13
Face value 10.00 10.00 10.00 10.00
EPS 10.97 13.71 16.84 19.37
Quarterly Profit & Loss Statement for the period of 31st Dec, 2013 to 30th Sep, 2014E
Value(Rs.in.mn) 31-Dec-13 31-Mar-14 30-Jun-14 30-Sep-14E
Description 3m 3m 3m 3m
Net sales 6598.86 8397.41 6627.20 5169.22
Other income 8.87 61.87 52.16 56.33
Total Income 6607.73 8459.28 6679.36 5225.55
Expenditure -5419.10 -7371.97 -5381.27 -4274.94
Operating profit 1188.63 1087.31 1298.09 950.61
Interest -187.72 -216.96 -267.57 -232.79
Gross profit 1000.91 870.35 1030.52 717.82
Depreciation -177.49 -150.80 -149.04 -155.00
Exceptional Items 96.43 70.39 -166.94 0.00
Profit Before Tax 919.85 789.94 714.54 562.82
Tax -280.95 -228.01 -212.51 -166.03
Net Profit 638.90 561.93 502.03 396.79
Equity capital 1240.95 1240.95 1240.95 1240.95
Face value 10.00 10.00 10.00 10.00
EPS 5.15 4.53 4.05 3.20

7. Ratio Analysis
Particulars FY13A FY14A FY15E FY16E
EPS (Rs.) 10.97 13.71 16.84 19.37
EBITDA Margin (%) 18.28% 17.95% 17.27% 17.53%
PBT Margin (%) 8.87% 9.86% 10.92% 11.56%
PAT Margin (%) 6.35% 6.94% 7.68% 8.17%
P/E Ratio (x) 25.51 20.41 16.62 14.45
ROE (%) 18.88% 21.55% 20.93% 21.27%
ROCE (%) 31.19% 34.77% 33.54% 34.49%
Debt Equity Ratio 0.99 0.83 0.61 0.51
EV/EBITDA (x) 8.86 7.89 7.39 6.74
Book Value (Rs.) 58.11 63.64 80.48 91.05
P/BV 4.82 4.40 3.48 3.07
Chart

8. OUTLOOK AND CONCLUSION
At the current market price of Rs. 279.90, the stock P/E ratio is at 16.62 x FY15E and 14.45 x FY16E
respectively.
Earning per share (EPS) of the company for the earnings for FY15E and FY16E is seen at Rs. 16.84 and Rs.
19.37 respectively.
Net Sales and PAT of the company are expected to grow at a CAGR of 11% and 21% over 2013 to 2016E
respectively.
On the basis of EV/EBITDA, the stock trades at 7.39 x for FY15E and 6.74 x for FY16E.
Price to Book Value of the stock is expected to be at 3.48 x and 3.07 x respectively for FY15E and FY16E.
We expect that the company surplus scenario is likely to continue for the next three years, will keep its
growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of
Rs. 319.00 for Medium to Long term investment.
INDUSTRY OVERVIEW
FIL is India’s largest manufacturer of PVC pipes and fittings. Domestic PVC pipe industry has been growing at a
12% p.a. Government of India has declared rural water management as its focus area. It has set a target of
bringing 650 lacs hectares of land under irrigation by 2020. The Twelfth Five Year Plan envisages investment in
excess of Rs. 5,00,000 crore for the irrigation sector. Further, an amount of Rs. 2,30,000 crore has been set aside
for water management. This will give further boost to the PVC pipes and fittings demand.

9. Global scenario
The global demand of PVC stands at around 37.5 million tpa. The growth rate for 2012-13 has been around 2%.
As against this, the Indian market for PVC resin has grown by almost 12% during 2012-13. The demand supply
gap which currently stands at around 1 million tpa is expected to grow over the years. Globally, the application of
PVC in pipes and fittings accounts for almost 43% of the total consumption. In India, the application of PVC in
pipes and fittings is almost 70% of the total consumption.
Disclaimer:
This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale
of any financial instrument or as an official confirmation of any transaction. The information contained herein is
from publicly available data or other sources believed to be reliable but do not represent that it is accurate or
complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s affiliates shall
not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the
information contained in this report. This document is provide for assistance only and is not intended to be and must
not alone be taken as the basis for an investment decision.

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