RR Kabel Q1 Results Review - Weak Margins Led To A Miss On Estimates: Motilal Oswal

Motilal Oswal Report

RR Kabel Ltd.'s Q1 FY25 earnings were below our estimate (27% miss on Ebitda/profit after tax). Revenue growth for cables and wires was ~11% YoY (versus our estimate of ~9% growth). While, Ebit margin of the cables and wires segment came at 7.2% (versus our estimate: 8.6%). Fast moving electric goods revenue grew 24% YoY (versus our estimate of 18% growth). However, FMEG loss increased to Rs 207 million (versus estimated loss of Rs 109 million).

Management indicated RR Kabel’s cable volumes should grow at ~30% YoY versus 13-14% YoY growth for wires. Further, it expects a 60-80 bp improvement in margins in the cable and wire segment in FY25. In FMEG, there was an additional advertising and promotion spending of Rs 120 million due to the ongoing brand transition.

We cut our FY25E/FY26E EPS by 11%/4% due to the underperformance in Q1 FY25 and higher losses in the FEMG business (estimate Ebit loss of Rs 559 million/ Rs 99 million in FY25/FY26 versus previous estimate of Rs 344 million/break-even).

We also introduce FY27E. We estimate an EPS CAGR of 34% over FY24-27. We value RR Kabel at 40 times Jun’26E EPS to arrive at our target price of Rs 2,140. Reiterate Buy.

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