Buy Finolex Cables; target of Rs 1650: Sharekhan

BUY

Finolex Cables’ (FNXC) performance was flat, with revenue growth of 2.2% and Operating profit decline by 13%. Q1 was a soft quarter impacted by a fall in copper prices and the elections period. Segment wise –Electric cables/communication cables/Copper rods/FMEG reported revenues of Rs. 1,032/119/403/68 crore with a growth of 2%/-13%/5%/45% on a y-o-y basis. Capex of Rs. 500 crore in next 2 years with significant capex of ~350-400 crore in FY25. The E-beam facility is awaiting regulatory permissions and is expected to be operational soon. The company has healthy cash, zero debt and a lean working capital cycle.

Finolex has a leadership position and strong brand in the Cables and wires segment. In the long term, optic fiber cables should do well, as India remains underpenetrated in the segment. We assign a multiple of 27x on FY26 EPS and arrive at a revised PT of Rs. 1,650. At CMP, the company trades at a valuation of 24x on FY26 earnings.

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