Finolex Industries Limited (FNXP) reported a 2% year-on-year growth in PVC pipes and fittings (P&F) volumes during the fourth quarter of FY25, reaching 102.3 Kilo Tonnes (KT). This modest volume growth occurred despite persistent weakness in underlying market demand. The company did not record any inventory-related losses during the quarter, indicating effective inventory management in a challenging operating environment.
However, realisations in the P&F segment declined by 1% sequentially, driven primarily by ongoing volatility in PVC resin prices. This price fluctuation weighed on revenue performance. While earnings before interest and taxes (EBIT) per kilogram showed an improvement compared to the previous quarter, it registered a 21% decline on a year-on-year basis, reflecting margin pressure over the longer term.
On the profitability front, consolidated EBITDA for the quarter came in at ₹1.7 billion, significantly ahead of expectations, exceeding estimates by approximately 80%. The PVC resin segment recorded EBIT of USD 109 per tonne, a notable improvement from USD 82 per tonne in the previous quarter. The company ended the quarter with a healthy net cash balance of ₹20.5 billion, up from ₹15.5 billion in March 2024, underscoring its strong liquidity position.
The outlook for the company remains constructive, with an SOTP-based target price of ₹273 projected for June 2026. This valuation is based on a forward P/E multiple of 25x applied to an estimated EPS of ₹10.1 and includes a 40% holding discount on the Finolex Cables stake. Factors supporting a potential re-rating include a continued strategic shift from agricultural to non-agricultural product segments and upcoming capacity expansion efforts aimed at strengthening long-term growth.
P&F volumes reached 102.3 KT in Q4 FY25, reflecting modest year-on-year growth of 2%. For the full fiscal year, the non-agri segment accounted for 33% of volumes, up from 31% in FY24. Management aims to achieve a balanced 50:50 agri to non-agri volume mix in the medium term and is targeting double-digit volume growth in FY26.
Projected volume growth over FY25–FY28E is estimated at a compound annual growth rate (CAGR) of approximately 12%, supported by additional brownfield pipe capacity (expected in the first half of FY26), recovery in demand, an expanded non-agri product portfolio, and possible gains from a shift toward organised sector players if BIS compliance becomes mandatory.
PVC resin volumes declined 19% year-on-year to 56 KT, remaining largely flat sequentially. The decline reflects a high base in Q4 FY24, which had witnessed elevated external resin sales. The company continues to consume a significant portion of its resin output internally.
EBIT for the PVC segment stood at USD 109 per tonne, marking a year-on-year decline due to price volatility, but reflecting a notable improvement over the previous quarter. P&F EBIT margin improved to 9.2% in Q4 FY25 from 3.2% in Q3, driven by operational cost optimisation, improved pricing mechanisms, and a more favourable product mix. EBITDA margins are expected to rise to 12.5–13% over FY26E–FY28E, compared to 11.5% in FY25, supported by a higher contribution from the non-agri segment.
The company ended FY25 with a net cash position of ₹20.5 billion, reflecting improved cash generation. Planned capital expenditure for FY26E is expected to range between ₹1.25–1.5 billion. As part of its ongoing brownfield expansion (50 KTPA), 25 KTPA of new capacity was commercialised in Q4 FY25, with the remaining 25 KTPA expected to come online by Q1/Q2 FY26. This will raise the total P&F production capacity to 520 KTPA.
In the short term, growth is expected to be supported by better utilisation of existing infrastructure and land parcels. For sustained volume growth, further capacity additions, particularly in underserved geographies, will be necessary over the next two years. Primary risks include continued volatility in PVC resin prices and intensifying competition from unorganised sector players, which could affect pricing discipline and market share.
