Buy Finolex Cables; target of Rs 1300: Sharekhan

Sharekhan's research report on Finolex Cables

Q2 numbers were a mixed bag with revenues rising 10.5%, but OPM declining to 8.1% from 12.3%. The margins were impacted by lower and volatile copper prices, high-cost inventory and channel destocking. Segment wise –Electric cables/communication cables/copper rods/FMEG reported revenues of Rs. 1,104/135/349/60 crore with a growth of 12%/-0.8%/-22%/10% on a y-o-y basis. Capex of Rs. 500 crore in the next two years with a significant capex of Rs. 350-400 crore in FY25. The E-beam facility is awaiting regulatory permissions and is expected to be operational soon.

Outlook

Finolex has a leadership position and is a strong brand in the C&W segment. In the long term, optic fiber cables should do well, as India remains underpenetrated in the segment. We maintain our Buy rating for a revised PT of Rs 1,300. At CMP, the company trades at a valuation of 18x on FY27 earnings.