Finolex Cables Q3 Results Review - A Soft Q3; Margin Recovery Is Key To Support Earnings: Systematix

Systematix Report

Finolex Cables Ltd.'s Q3 was soft as revenue grew by a low 6% YoY and Ebitda margin contracted 136 basis points QoQ to 10.9% owing greater mix of low margin auto cables. Electrical wires division reported 8% volume and value growth; management expects volumes to improve with visible rise in construction activity.

Communication cables revenue dipped 11% YoY owing to delay in Bharatnet tender process coupled with private telecom operators focus on operationalising 5G rollouts. The tenders are now expected to be floated toward end of February- 24 with possible order flows two-three months thereafter.

Fmcg revenue has scaled up in last two years (FY24E: ~Rs 2.3 billion, took eight years to cross Rs 1 billion), continued spending on product launches, dealer schemes and A&P is restricting margins.

We are watchful of Finolex Cables Rs 5 billion revenue guidance in two-three years. Capex programs are progressing well. The E-Beam plant will likely operationalise by April- 24 while Preform plant is expected to commission by Q4 FY25.

We broadly maintain FY25E/26E earnings and expect 12%/20%/23% compound annual growth rate in revenue/Ebitda /profit after tax over FY23-26E on recovery in volumes and margins. Maintain 'Hold' with an unchanged target price of Rs 1,165 (20 times FY26E price/earning to the core business for ~15%/25 return on equity/return on investment capital).

Click on the attachment to read the full report:

DISCLAIMER

This report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.