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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).
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Also Read: Adani Enterprises Unit Incorporates New Subsidiary For Investment In Commercial Enterprises
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