Finolex Industries hits over 10-month high; surges 8% on heavy volumes

Shares of Finolex Industries hit over 10-month high of Rs 190.95 as they rallied 8 per cent on the BSE in Wednesday's intra-day trade, in an otherwise subdued market, amid heavy volumes. The stock of the plastic products company was trading at its highest level since January 25, 2022. In comparison, the S&P BSE Sensex was down 0.61 per cent at 61,324 at 12:57 PM.

In the past one month, the market price of Finolex Industries has appreciated by 22 per cent as compared to 0.80 per cent rise in the benchmark Sensex index. The average trading volumes on the counter doubled with a combined 4.6 million equity shares having changed hands on the NSE and BSE till the time of writing of this report.

Finolex Industries is India's largest backward integrated manufacturer of PVC-U pipes and fittings for the plumbing-sanitation and agricultural sectors.

The company's financial results for the September quarter had a severely adverse impact due to sharp correction in PVC prices against high priced inventory of raw material and finished goods.

"Second quarter is generally a drag on volume due to Monsoon. However, the company has delivered higher volumes over last year, which reflects spur in demand," the management said.

The silver lining is that the correction in commodity rates could further improve demand from consumers across segments. The management said the company is well positioned to sail through this trough of the cycle as it has a strong debt-free balance sheet with positive cash flows.

In the first half (April-September) of the financial year 2022-23 (H1FY23), PVC pipes and fittings volume registered a year-on-year (YoY) growth of 18 per cent to 131,178 MT. PVC Resin volume registered a (YoY) growth of 14 per cent to 1,16,809 MT.

The government had allocated Rs 60,000 crore in the Union Budget 2022 for the flagship scheme – ‘Har Ghar Nal se Jal’ – to provide tap water to rural households. This translates to a 20 per cent increase in budget allocation under this scheme. Additional government schemes such as Housing for All, AMRUT – Atal Mission for Rejuvenation and Urban Transformation, Swachh Bharat Mission, Jal Jeevan Mission, and Pradhan Mantri Krishi Sinchayee Yojana (PMKSY) would further help boost demand in the piping industry within India.

The biggest drivers of growth in the Indian piping industry are the rising demand for the irrigation, water supply and sanitation sectors, in addition to the demand for replacement of metal pipes in the residential real estate market.

Asia-Pacific is the largest market for PVC products, accounting for more than 50 per cent of the global PVC market. A growing agriculture sector, infrastructure development, rapid industrialisation, favourable government policies, rising urbanisation and growing usage of PVC in flooring applications across private, commercial and industrial premises are expected to contribute to the growing demand for PVC resin, Finolex Industries said in FY22 annual report.