Limited downside seen in Finolex Cables, says Rajen Shah

7577 Investors following Finolex Cables. Share this News with them.

0

Like this story, share it with millions of investors on M3

Limited downside seen in Finolex Cables, says Rajen Shah

Limited downside seen in Finolex Cables, says Rajen Shah, Angel Broking.

Post your opinion here

 

0

Tweet

Share on Tumblr

Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See previous views by Rajen Shah See what other Experts & Brokerages are saying about Finolex Cables See messages about Finolex Cables

Limited downside seen in Finolex Cables , says Rajen Shah, Angel Broking.

Shah told CNBC-TV18, "Finolex Cables was once a blue chip company, if you see this company's track record right now it has been beaten as if it's any tom dick and harry company but if you see the company's performance since the time it went public, it has been - it was termed blue chip till 2002 but of late it has lost it's shine and those days are not far off when it is sure to regain it's lost glory. Between these years from the public issue till 2002 this company issued 4 bonuses in 1:1 ratio and 2 buy backs and the company has been a very good dividend payer as well. Now this company is basically into electrical cables which is about 60-65% of the turnover. About 15% comes from communication cable and test 15% comes from copper rods which is captively consumed and the electrical switches and all that."

He further added, "We all know that the two sectors to which it is catering is going through immense pressure whether it is power sector because of it coming to a complete halt actually and the telecom space because of what is happening in the industry many of the players are reluctant to put more money into 3G services in the tier 2 and tier 3 cities. And that is the reason why the stock has come down. 2 years back the stock was quoting at about Rs 65 and today it is quoting at about Rs 30. The stock had gone down to Rs 20 levels and after that we saw significant buying by the promoters actually, whether investment company orbit electrical have been regularly buying the shares of Finolex Cable from the market by creaping bushan and over the past 4 months they have accumulated almost 10 lakh shares at an average price of about Rs 30-33. So at this price the promoters themselves are buying because they find value in the story at this point of time. Now besides this this is basically matter of time. In the next 12-18 months we'll see a complete turnaround of both these sectors and Finolex cable should be back in action. But the interesting thing is that the company also owns a 33% stake in Finolex Industries."

"We worked out the actual value of Finolex Industries, the stock is at Rs 46 but if you consider the capacity it has 260000 metric tones of PVC, 150000 tones of PVC pipes, then 33 megawatt plant, then there is a small plot at Pawas, they have a Pawas in Ratnagiri and they also have 70 acres of land at Chinchwad which is worth about Rs 350 crore. So if you work out the actual value of Finolex Industry itself works about Rs 85 per share after taking off that debt and this company Finolex cable owns 33% stake in that company. So the value of that 33% stakes works out to be about Rs 330 crore, with a current market cap of Finolex cable itself it is about Rs 460 crore. So if you take out this Rs 330 crore of investment from Rs 460 crore of market cap you are getting a Rs 2000 crore company for just about Rs 130-140 crore."

"They also have a joint venture with Hitachi Cable and Sumitomo. Electrical cables of Japan in the form of a new company called Finolex J-Power Systems which is now going to get operational in the next 1-2 months. So that is basically into high voltage extra voltage cables and that is going to be a very significant revenue booster to it's top line. So on parameters of Rs 30 the stock is having very limited downside and the upside could be as high as 100% in two years. We own about 6-7 lakh shares of this company in our PMS."