Accumulate Finolex Cables; target of Rs 1108: Geojit

Geojit's research report on Finolex Cables

Finolex Cables Ltd. (FCL) is India's largest manufacturer of electrical (80% of revenue) and telecommunication cables (16%). FCL has a wide distribution network with a high brand recall. H1FY24 revenue grew by 13.5% YoY, while PAT grew by 28% YoY, largely led by healthy volume and higher other income. EBITDA grew by 40% YoY, led by better scale and 230bps YoY expansion in margins on account of a fall in input costs. Healthy construction activities are driving the volumes in wires and cables segment while higher government capex is driving power cables, which is expected to continue going forward. As input costs have largely stabilized, EBITDA margins will gradually improve going forward, supported by higher volumes. Given a healthy balance sheet, strong cash flows, and a healthy earnings outlook of 19% CAGR over FY23–25E, we reiterate our positive stance on FCL.

Outlook

We value FCL’s core business at a P/E multiple of 21x on FY25E and value FCL’s investments in Finolex Industries at Rs.126 to arrive at a SOTP price target of Rs.1,108 and maintain Accumulate rating.