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Equirus Securities
Finolex Cables (Long)
CMP: ₹449
Target: ₹555
Finolex Cables is a manufacturer of electrical and communication cables, and copper rods. The company's business segments include electrical cables, communication cables, copper rods and others.
Finolex Cables 4Q revenues grew 3 per cent y-o-y to ₹820 crore, which were 6 per cent below EE. Revenues for the Electrical Cables Segment (ECS) were up 6 per cent y-o-y [in line with Equirus estimate(EE)], but the communication cables segment (CCS; -15 per cent y-o-y) was hit by delays in order releases.
Gross margins for the quarter declined 205 bps y-o-y/160 bps q-o-q to 26.5 per cent, 212 bps below EE, on supply-related issues which would continue in FY20E as well. Accordingly, we pare FY20/FY21 sales/ EBIDTA estimates by 2 per cent/3 per cent and 3 per cent/4 per cent.
We remain positive on Finolex Cables’ mid-to-long-term prospects and thus restate ‘long’ on the stock; our March 2020 target price of ₹555 (₹577 earlier) is set at a 20x SA TTM EPS of ₹26.2 with ₹91/sh ascribed to Finolex Cables. We expect uncertainty over management control to remain a stock overhang and pressure on valuations to continue in the near term.
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