RR Kabel Q2 Review - Export Challenges Results In Lower Revenue Growth; Reiterate 'Buy': Yes Securities

Yes Securities Report

RR Kabel Ltd.'s performance has been muted with revenue growing at 12.5% YoY (5.2% lower than estimates), Wires and Cables revenue grew at 11.1%, which is lower than peers as the company is facing challenges in exports as availability of shipping containers has become difficult and shipping timeline to Europe has increased from 24 days to 36 days resulting in loss of some exports orders.

Margins in Wires and Cables stood at 5.1% contracting sequentially by 209 bps. Margin contraction is attributed to huge volatility in commodity prices and negative operating leverage resulting on back of slower growth.

On the FMEG front revenue grew by 24% yoy driven by strong performance of Fans, Appliances and Switches, losses in FMEG have come off and it is lowest quarterly loss.

Reduction in FMEG loss has been on account of superior product mix and healthy volume growth. Management is confident of strong performance continuing in FMEG and breaking even in H2 FY26. On the wires and cables side management has lowered its volume growth to 15% versus earlier 20% considering export challenges and management has become conservative in its guidance given subdued performance of H1.

Its capex plan of doubling the capacity of cables is underway and on track and company is parallelly working on future capex plan.

Considering muted Q2 and lowering of management guidance of 15% volume growth in wires and cables we now value the company at 34 times FY27 earnings per share.

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