Finolex Cables - 4QFY2013 Result Update - Angel Broking

Finolex Cables Ltd (FCL) reported a mixed set of numbers for 4QFY2013. The top-line reported a flat yoy growth of 4.5% to Rs. 632cr, in line with our estimate of Rs. 629cr. The EBITDA for the quarter grew by 14.4% yoy to Rs. 67cr while the EBITDA margin expanded by 91bp yoy to 10.5%. Expansion was mainly due to reduction in raw material cost and other expenses as a percentage of sales. However, the net profit declined by 12.6% yoy to Rs. 39cr, owing to a tax expense of 16% (on PBT), which was absent in the corresponding quarter of the previous year.

Growth in user industries to drive growth: FCL serves varied user industries, considering the wide usage of cables. With customers increasingly demanding high-quality and branded wires, FCL is poised to grow. The company, with its wide distribution reach and penetration in the market, is well poised to meet increase in demand. Further, we expect the company's initiatives like- 1) increase in advertisement spends 2) setting up of a solar power plant for captive consumption, and 3) reduction in sale of copper rods to third party, to boost top-line and enhance profitability going forward.

Outlook and valuation: We expect the company's sales to post a 13.0% CAGR over FY2013-15E to Rs. 2,899cr, and EBITDA to register a CAGR of 11.6% over the same period with margin at 9.8% in FY2015E. However, PAT is expected to post a moderate CAGR of 9.0% over the same period owing to end of 100% tax exemption on Roorkee plant production (30% from FY2014E). At the current market price, FCL is available at an attractive valuation of 4.4x PE for FY2015E. As we rollover to FY2015E, we maintain our Buy recommendation on the stock with a revised target price of Rs. 68 based on a target PE of 6x FY2015E earnings.

Source : Equity Bulls

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