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Target: ₹809
CMP: ₹901.90
Finolex Cables’ (FCL) Q2-FY24 consol. revenue/EBITDA/PAT stood at ₹1,180 crore/₹150 crore/₹140 crore, +9/48/156 per cent y-o-y, respectively, albeit on an eroded base quarter. EBITDA beat our estimate by 10 per cent owing to better gross margin. Electrical cable/communication cable revenue stood at ₹980 crore/₹140 crore, +13 per cent/(14 per cent) y-o-y, respectively.
We increase our revenue/EBITDA/PAT estimates by 1-5 per cent over FY24F-25F and introduce FY26F estimates. Higher optic fibre salience increases business cyclicality, and the stock could structurally trade at a meaningful discount to its electrical C&W peers, in our view. Most of the capex announced for electrical cables and communication cable (optic fibre preform, cable drawing towers) is on track to be incurred by March 2025. New orders for optic fibre cable from private telcos and Indian government are delayed, and the bidding is expected to start in Jan 2024, as per management.
Given the C&W upcycle, we expect core business FY23-26F EPS CAGR of 20%. However, the looming promoter family row bothers us
Upside risks: Faster and amicable settlement of promoter family’s legal dispute and a sudden rise in optic fibre prices.
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