Finolex Cables - 4QFY2012 Result update - Angel Broking

For 4QFY2012, Finolex Cables (Finolex) reported strong 21.1% qoq and 12.1% yoy growth in its top line to Rs.605cr. The company's operating profit increased by whopping 45.9% yoy to Rs.58cr. OPM expanded by 223bp yoy and 136bp qoq to 9.6%. PAT came in at Rs.45cr, up 139% yoy and 225% qoq. Going ahead, the business outlook remains positive, given the growth prospects in user industries and higher sales from the high-tension (HT) cables plant. We maintain our Buy rating on the stock.

Highest sales and PAT in the last eight quarters, while margins expand: Finolex reported 12.1% yoy growth in its top line to Rs.605cr. The main electrical cables segment reported strong growth of 39.5% yoy and 21.3% qoq to Rs.506cr. However, the other two segments, communication cables and copper rods, reported declines of 27.4% and 36.7%, respectively. The company's EBITDA margin increased by 233bp yoy to 9.6% on the back of lower raw-material cost. Raw-material cost as a percentage of sales declined to 74.9% in 4QFY2012 compared to 80.2% in 4QFY2011. PAT increased by 139% yoy to Rs.45cr (Rs.19cr) on the back of margin expansion, lower forex loss, higher other income and tax adjustments. Other income increased by 130% yoy to Rs.9cr, while forex loss declined by 15.6% to Rs.10cr. Consequently, PAT margin increased by 391bp yoy to 7.4% (3.5%).

Outlook and valuation: We remain positive on the company's prospects going ahead, given strong growth in user industries, which are showing no signs of abating. Higher sales from the HT cables plant and start of production at the extra high voltage (EHV) plant would further boost the company's growth. Overall, we expect the company's sales to post a 13.6% CAGR over FY2012–14E, while PAT is expected to post a CAGR of 16.6% over the same period. At the CMP, the stock is trading at 3.5x its FY2014E EPS. We maintain our Buy rating on the stock with a target price of Rs.61.

Source : Equity Bulls

Keywords