Views on Finolex Cable - Angel Broking

Views of Ms. Twinkle Gosar (Equity Research Associates-Mid Caps, Angel Broking) on Finolex Cable results:

"Finolex Cables Ltd. (CMP: Rs 140 /TP: Rs 149/ Upside: 6.6%)

Finolex Cables Ltd. (FCL) reported mixed set of numbers for 4QFY2014. Top-line reported flat growth of 2.7% yoy to Rs 649cr, 10.9% lower than our estimate of Rs 729cr. Communication cables (CC) reported strong growth of 33.2% yoy to Rs 67cr while Electrical cables (EC) reported flat growth of 3.1% yoy to Rs 563cr. Copper rods (CR) segment, however, dip by 47.7% in the quarter compared to same quarter previous year. EBITDA for the quarter grew by 12.7% while EBITDA margin expanded by 103bp on a yoy basis to 11.6% mainly attributable to lower raw material and employee cost. For EC and CC segment, EBIT margin expanded by 126bp and 346bp yoy to 15.0% and 16.9% respectively. For CR segment, margin dip by 682bp. Owing to negative tax outgo coupled by strong other income, bottom line grew by 47.6% yoy to Rs 69.3cr while PAT margins are at 10.7%, 451bp higher yoy.

On annual front, top-line reported flat growth of 3.9% to Rs 2,359cr lead by robust growth of 14.0% in CC segment while EC segment reporting flat growth of 1.6%. EBITDA for FY2014 too grew marginally by 8.0% to Rs 247cr with margin expansion of 40bp to 10.5%. On segmental front, both EC and CC reported EBIT margin expansion of ~40bp to 12.6% and 13.8% respectively. Subsequently, net profit grew by 8.8% yoy to Rs 208cr, while margins improved by 239bp to 8.8%. Although the CC segment reported strong performance during the quarter (owing to the recently bagged orders by the company), its EC segment which is considered to be the stable business of the two has been flat. Additionally, owing to the recent run-up in the stock, we recommend Accumulate rating on the stock with revised target price of Rs. 149 based on target PE of 9x for FY2016E earnings."

Source : Equity Bulls

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