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Poised for strong top-line growth: Finolex Cables is poised for
strong growth over the next few years, owing to entry in the
verticals of high tension (HT) and extra high voltage (EHV) cables
and market share expansion in the existing low tension (LT) cables
segment. In the LT cables segment, organised players are
expected to structurally increase their market share as consumers
shift their preference towards branded products. Entry into the
HT cables segment gives accessibility to the generation and
distribution segment, where the market opportunity is estimated
at `37,000cr over the next 10 years
Large benefits from the Roorkee plant: The rapid ramp up of
production at the Roorkee plant has already started delivering
results. The proximity to the growing North Indian markets and
tax benefits from this plant are expected to boost the turnaround
of the company. We expect profits to increase to `163cr in
FY2013E from `87cr in FY2011.
Derivative losses expected to taper off: The company's derivatives
losses are expected to decline further going ahead. Finolex Cables
has registered substantial derivatives losses over FY2009-11.
However, the worst is behind us in this regard and losses are
expected to taper going ahead. By FY2013, these losses are
estimated to decline to `14cr from `34cr in FY2011. Besides,
the company has already incurred capex that is sufficient for its
growth over the next few years. As a consequence of these factors
and strong top-line growth, we expect RoEs to improve from
12.8% in FY2011 to 18.2% in FY2013E.
Stock is currently trading at attractive valuations: At the CMP,
the stock is trading at attractive valuations of 4.5x FY2013E EPS
and 0.8x FY2013E BV. We have valued the stock at P/E of 7.0x
FY2013E EPS and have arrived at a target price of `75. We have
a Buy rating on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Poised for strong top-line growth: Finolex Cables is poised for
strong growth over the next few years, owing to entry in the
verticals of high tension (HT) and extra high voltage (EHV) cables
and market share expansion in the existing low tension (LT) cables
segment. In the LT cables segment, organised players are
expected to structurally increase their market share as consumers
shift their preference towards branded products. Entry into the
HT cables segment gives accessibility to the generation and
distribution segment, where the market opportunity is estimated
at `37,000cr over the next 10 years
Large benefits from the Roorkee plant: The rapid ramp up of
production at the Roorkee plant has already started delivering
results. The proximity to the growing North Indian markets and
tax benefits from this plant are expected to boost the turnaround
of the company. We expect profits to increase to `163cr in
FY2013E from `87cr in FY2011.
Derivative losses expected to taper off: The company's derivatives
losses are expected to decline further going ahead. Finolex Cables
has registered substantial derivatives losses over FY2009-11.
However, the worst is behind us in this regard and losses are
expected to taper going ahead. By FY2013, these losses are
estimated to decline to `14cr from `34cr in FY2011. Besides,
the company has already incurred capex that is sufficient for its
growth over the next few years. As a consequence of these factors
and strong top-line growth, we expect RoEs to improve from
12.8% in FY2011 to 18.2% in FY2013E.
Stock is currently trading at attractive valuations: At the CMP,
the stock is trading at attractive valuations of 4.5x FY2013E EPS
and 0.8x FY2013E BV. We have valued the stock at P/E of 7.0x
FY2013E EPS and have arrived at a target price of `75. We have
a Buy rating on the stock.
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