FINPIPE - Finolex Industries Ltd. Share Price

Outlook by Management:
Finolex Industries expects a challenging near-term demand environment but is optimistic about FY26, projecting double-digit growth driven by government initiatives (Swamih, Jal Jeevan Mission, Dhan-Dhanya). Margins are anticipated to improve with potential PVC price stabilization, anti-dumping duties, and reduced discounting. The company is focused on expanding non-agri segments (targeting 50% mix in 3"“4 years) and optimizing brownfield capacity over greenfield projects.

Major Points:

1. Demand & Volume: Weak FY25 volume growth (single-digit), but FY26 growth expected to rebound (double-digit) due to infrastructure/agri schemes.
2. Margins: Q3 EBITDA margin dipped to 8.3% (vs. 11.8% YoY) due to competitive discounts; improvement expected with stable PVC prices and reduced discount pressure.
3. PVC Resin: Volumes surged 30% YoY in Q3, but realizations fell. Anti-dumping duty/BIS mandates could boost prices; spreads ($482/EDC, $165/VCM) remain stable.
4. Expansions: 50,000 MT capacity addition (25k in Q4 FY25, 25k in Q1 FY26) at existing sites; greenfield plans on hold.
5. Segmental Shift: Targeting 50% non-agri sales (from 34%) via project business (builders/MEP consultants) and retail expansion.
6. Balance Sheet: Net cash surplus of Rs.2,300 crore (vs. Rs.1,570 crore YoY); FY25 capex ~Rs.100"“150 crore.
7. PVC Pricing: Stability critical; discounts eased post-Q3. BIS norms delayed to June 2025.
8. CPVC Growth: Modest 3"“4% volume growth; ~5% of total pipes/fittings sales.
9. Inventory: Channels at low inventory; no significant price cuts expected.
10. Land Sale: Rs.417 crore gain in FY25; remaining 10"“15% land retained.

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Question 1:
So, in 9 months, we have broadly done 3.9% volume growth. So how one can look at the fourth quarter? And till now in January and February 10, how are we seeing the volume growth? And if you can also help us in terms of the next year or maybe a couple of years, particularly previously, we are looking at 10%, 15% kind of a growth. So how one can look at?
Answer:
Volume growth for FY25 is expected to remain single-digit due to weak demand, with January showing modest growth and February improving. Next year's growth is projected to rebound to double digits, driven by government schemes like Jal Jeevan Mission and Swamih. The company anticipates stable PVC prices and demand recovery as inventory stabilizes.

Question 2:
So, in that scenario, in terms of the margin level, whether at an EBITDA level, is it fair that we can have 11% plus kind of a margin in FY '26?
Answer:
Margins are expected to improve due to reduced discounting pressure and stable PVC prices. While no specific EBITDA margin guidance was given, management noted competitive pricing eased post-Q3, and inventory normalization could support margin recovery.

Question 3:
And lastly, on the expansion front. So 40,000, 50,000 tons we were suppose to add by March '25. And for next year, I think the next expansion, we were looking at greenfield, I think 1 lakh plus kind of a number. So, if you can update on that front?
Answer:
45% of the 50,000-ton brownfield expansion is complete, with 25,000 tons operational in Q4 FY25 and the rest by Q1 FY26. Greenfield projects are on hold, prioritizing ROI-focused brownfield upgrades. Capex for FY25 and FY26 remains Rs.100"“150 crore annually.

Question 4:
So, in 9 months, how much capex we have done and for fourth quarter, how much expense? And next year, given that the greenfield is not there, let's say, so currently, how one can look at the capex?
Answer:
FY25 capex is ~Rs.100 crore, including maintenance. FY26 capex will remain similar (Rs.100"“150 crore). Greenfield plans are delayed, with focus on optimizing existing capacity.

Question 5:
So, possible for you to quantify PVC and CPVC volume growth for the quarter, if not, say, for 9 months?
Answer:
PVC pipe volume grew 5.5% YoY in Q3, with 9-month growth at 4%. CPVC volume grew 3"“4% YoY in Q3, reflecting gradual market penetration efforts.

Question 6:
What is our current capacity. I think it's around 470 pipes and fittings. If you can bifurcate it in fittings and how should we see this number of 470 going forward, say, year-end and next year?
Answer:
Current capacity is 420,000 MT for pipes and 50,000 MT for fittings. Post-expansion, pipe capacity will reach 470,000 MT by Q1 FY26, with fittings unchanged. Total capacity rises to 520,000 MT.

Question 7:
Firstly, on the demand front, we've seen start of agri season. How is the demand both the plumbing side and on the agri side? And secondly, we have seen a fall of about Rs.3-odd in terms of PVC prices. Are you looking at another price drop?
Answer:
Demand improved slightly in February (agri and non-agri) after weak January. PVC prices dropped by ��3/ton, but realizations are stable as competitors avoid aggressive discounting. Further price adjustments depend on market dynamics.

Question 8:
What are the key 3, 4 initiatives or strategies that are in place to achieve this [50% non-agri share in 3"“4 years]. And moreover, what are the challenges that you are facing in scaling up this business.
Answer:
Non-agri growth is driven by project-focused teams, MEP consultant partnerships, and retail network expansion. Current non-agri mix is 34% (vs. 32% YoY), with project business contributing 10"“15%. Challenges include slower retail adoption and competition.

Question 9:
How should one think about the growth in the medium to long-term perspective [for agri]? Is it largely the 6%, 7% industry growth? Or do you see any tailwinds in that segment?
Answer:
Agri growth aligns with GDP +2"“3%, targeting ~9"“10% annually. Tailwinds include rural schemes (e.g., Dhan-Dhanya) and Jal Jeevan Mission. No significant near-term acceleration expected.

Question 10:
What is the current split between retail and the projects on the non-agri front, if you could share that?
Answer:
Projects account for 10"“15% of non-agri sales (retail: 85"“90%). Growth will focus on expanding project business via builder partnerships and consultant approvals.