Fine Organic hits record high; soars 35% in four days on strong Q4 results

PAT jumped nearly four-fold; Ebitda margins improved to 25.8 per cent from 15.1 per cent owing to shift in the product mix towards high- margin value-added products

Shares of Fine Organic Industries hit a new high at Rs 5,523, up 8 per cent on the BSE in Thursday’s intra-day trade, in an otherwise subdued market. In the past four trading days, the stock of the specialty chemicals has soared 34.7 per cent after the company reported strong March quarter (Q4FY22) earnings, with consolidated profit after tax (PAT) growing nearly four-fold to Rs 121.7 crore when comapred with a PAT of Rs 31.8 crore in Q4FY21.

At 10:40 AM; the stock traded 6 per cent higher at Rs 5,448, as compared to a 0.36 per cent rise in the S&P BSE Sensex. With the past four-day rally, the stock now trades at an almost 600 premium to its issue price of Rs 783 per share. The company had made its stock market debut on July 2, 2018 and had hit a record low of Rs 735.20 on July 23, 2018.

In Q4FY22, the company's revenue grew 91 per cent year on year (YoY) to Rs 617 crore as against Rs 323 crore in the year-ago quarter. Earnings before interest, taxes, depreciation, and amortization (Ebitda) jumped 227 per cent YoY to Rs 159 crore. Ebitda margins improved to 25.8 per cent from 15.1 per cent owing to shift in the product mix towards high- margin value-added products, new customers, and new approvals in Q4.

The board has recommended a final dividend of Rs 9 per equity share for the financial year ended March 31, 2022.

Analysts at HDFC Securities said they like Fine Organics, owing to leadership in oleo-chemical based additives in the domestic and global markets with a loyal customer base, unique business model with high entry barriers, diversified product portfolio, and pricing power. However, they downgraded the stock from BUY to ADD, with a revised target price of Rs 5,290.

"The downgrade is largely owing to 22 per cent increase in the stock price in the past three months," the brokerage firm said in a report dated June 1, 2022.

Fine Organic carries on business in India and abroad, as manufacturers, processors, suppliers, distributors, dealers, importers, exporters of wide range of oleochemical-based additives used in foods, plastics, cosmetics, coatings and other specialty application in various industries. The subsidiaries are engaged in trading of product manufactured by the parent company.

Tech view

Outlook: Bullish

Support: Rs 4,910

On the back of a 33-per cent rally over the past 4 days, the stock of Fine Organics surpassed its immediate resistance of Rs 5,114, on the daily charts. The level, now, becomes its immediate support, followed by Rs 4,462-mark, which is its 20-day moving average (20-DMA). The weekly chart suggests support at the upper end of the Bollinger Band at Rs 4,910. 

On the upside, the stock can potentially rally up to Rs 5,625 as indicated by the yearly Fibonacci chart. 

The price-to-moving average action, as well as momentum indicators, are in the favour of the bulls. While the 14-day Relative Strength Index (RSI) has minutely entered the overbought zone, all other indicators highlight strength in the stock.

(With inputs from Nikita Vashisht)