Buy Finolex Cables; target of Rs 1800: Sharekhan

Sharekhan's research report on Finolex Cables

Q4FY24 numbers were decent, with Revenue/operating profit/PAT of Rs. 1,401/162/186 crore and a growth of 14%/11%/6% y-o-y respectively. Revenue growth was led by strong demand from the construction sector. Segment wise – Electric cables/communication cables/Copper rods/FMEG reported revenues of Rs. 1,201/128/481/64 crore with a growth of 16%/-9%/24%/41% on a y-o-y basis. Capex of Rs. 340 crore in next 12-24 months for upgrading its offerings in OFC, auto wires and backward integration would boost volumes and margins going forward. The company has healthy cash, zero debt and a lean working capital cycle. Strong demand in the real estate and infrastructure sectors bodes well for the company. Also, in the long term optic fiber cables should do well as India as a country remains underpenetrated in the segment. With good growth, we expect the valuation multiple of the company to narrow vs its peers.

Outlook

We assign a multiple of 30x on FY26 EPS and arrive at a revised PT of Rs. 1,800. At CMP, the company trades at a valuation of 26x on FY26 earnings.

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