Finolex Inds.

Finolex reported a 6% decline in total volumes to 65,336 MT for Q2 FY26, primarily due to an extended monsoon season that dampened agricultural demand. Despite this, EBITDA margins expanded significantly to 15.1% from a low base of 1.3% in the previous year. This was driven by a robust gross margin of 42%, up from 30% YoY, as the company benefited from a better product mix and stable PVC-EDC spreads of approximately $535.

The company is successfully reducing its dependence on the seasonal agri segment. Non-agri volumes grew 7% YoY, now representing 44% of the total mix compared to 39% last year. CPVC volumes continue to grow at double-digit rates, contributing 8% to the total volume. Management reiterated its long-term goal of achieving a 50:50 split between agri and non-agri segments to manage business seasonality.

Finolex maintains a massive net cash surplus of ₹2,360 crores, which analysts highlighted as a potential drag on capital efficiency. Management remained non-committal on a specific timeline for deploying this cash, stating that it depends on internal planning, capex requirements, and board approvals. They noted that any surplus after internal needs would eventually be returned to shareholders, but provided no immediate roadmap.

Management expressed high confidence that the imposition of anti-dumping duties (ADD) on PVC resin is imminent, likely within a week of the call. They estimate the impact will be an increase of ₹3 to ₹6 per kg depending on the region of origin. This is expected to support domestic pricing and margins, acting as a 'pass-through' that corrects overall market pricing.

The company currently operates at a total capacity of 520,000 MT, having added 25,000 MT in Q1. H1 FY26 utilization stood at 70%. Management plans to invest ₹100-200 crores annually in growth capex, targeting net capacity additions of 50,000 to 80,000 MT per year. They expect capacity utilization to improve to the 74-75% range by FY27-28.