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Anand Rathi
Finolex Cables (Buy)
CMP: ₹559.10
Target: ₹649
Finolex Cables Ltd 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.
We initiate coverage on Finolex Cables, with a Buy and a target of ₹649 (19x FY20e EPS). We expect revenue/PAT to register 14/26 per cent CAGRs over FY18-20, aided by higher growth in optical-fibre cables and the newer electrical-goods segments. On the significant re-rating in the past five years, further re-rating depends on success in its new product categories, significant improvement in the joint venture performance while keeping the earnings growth momentum in its core businesses going. Its 32.4 per cent stake in Finolex Industries is valued at about ₹2,600 crore (₹131 a share).
Risks: Demand disruption, keener competition, volatile copper prices.
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