Finolex Industries Ltd. - Margins Spring A Positive Surprise; Result Update Q3FY16 ::Edelweiss

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Finolex Industries Ltd - Quarter Marred by One-Offs; Result Update Q2FY15:: Edelweiss

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Finolex Cables: Strong Brand Equity:: Sushil Research

STRENGTH: Strong Brand Equity, Vast Distribution Network, Healthy Balance Sheet, Strong Operating Cash-Flows
WEAKNESS: Dependency on Govt. Reforms in Power & Telecom Sector
OPPORTUNITIES: Diverse End-user Industries, Turnaround of New Ventures (CFL & Switches)
THREAT: Increasing Competition from Unorganized Players, Volatility in Copper Prices & Currency.

Buy Finolex Cables : 2QFY2012 Result Update: Angel Broking,

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For 2QFY2012, Finolex Cables (Finolex) reported a 1.7% yoy increase in its top
line to `499cr. The company’s operating profit declined by 4.0% yoy to `40cr.
OPM declined by 48bp yoy but improved by 50bp qoq to 8.0%. PAT came in at
`20cr, up 4.2% yoy, but declined by 2.4% 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.
Sales increase and margins dip: Finolex reported a 1.7% yoy increase in its top
line to `499cr. The main electrical cables segment reported strong growth of
19.4% yoy. However, the other two segments, communication cables and copper
rods reported declines of 22.4% and 16.5%, respectively. Despite a decline in
OPM and operating profit, PAT increased by 4.2% yoy to `20cr (`19cr), while PAT
margin increased by just 10bp yoy to 4.0% (3.9%). The increase in PAT was
largely on the back of higher other income and lower tax rate, which was
somewhat offset by higher forex loss during the quarter. Other income increased
by 12.7% yoy to `17cr (`15cr), while tax rate declined to 21.4% in 2QFY2012
from 35.9% in 2QFY2011. Exceptional items, which included forex losses,
increased by 36.2% yoy to `16cr (`12cr).
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 EHV
plant would further boost the company’s growth. However, in view of the
company’s limited ability to effectively pass on copper price fluctuations, we have
revised our OPM estimates for FY2012E and FY2013E downwards to 8.0% and
8.5%, respectively. Overall, we expect sales to grow at a 7.2% CAGR over
FY2011–13E, while PAT is expected to post a CAGR of 22.6% over the same
period. At the CMP, the stock is trading at 4.1x its FY2013E EPS. We maintain our
Buy rating on the stock with a revised target price of `51 (`59).

Finolex Cables (CMP: `40/ TP: `59/ Upside:47%):: Angel Broking Picks for September 2011

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􀂄 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.
􀂄 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 the
company’s profits to increase to `151cr in FY2013E from `87cr in FY2011.
􀂄 Finolex Cables has registered substantial derivative losses over FY2009-11. The
company’s derivative losses are expected to decline further going ahead.
By FY2013, these losses are estimated to decline to `13cr from `34cr in FY2011.
􀂄 At the CMP, the stock is trading at attractive valuations of 4.0x FY2013E EPS and
0.6x FY2013E BV. We have valued the stock at P/E of 6.0x FY2013E EPS and
arrived at a target price of `59. We have a Buy rating on the stock.

Finolex Cables ( TP: `59/ Upside:44%):Angel Broking, TOP PICKS

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􀂄 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.
􀂄 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 the
company’s profits to increase to `151cr in FY2013E from `87cr in FY2011.
􀂄 The company's derivative losses are expected to decline further going ahead. Finolex
Cables has registered substantial derivative losses over FY2009-11. However, the
worst is behind in this regard and losses are expected to taper going ahead.
By FY2013, these losses are estimated to decline to `13cr from ` 34cr in FY2011.
􀂄 At the CMP, the stock is trading at attractive valuations of 4.1x FY2013E EPS and
0.7x FY2013E BV. We have valued the stock at P/E of 6.0x FY2013E EPS and
arrived at a target price of `59. We have a Buy rating on the stock.

Finolex Cables:: Angel Broking Top Pick: June 2011

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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.

Finolex Cables executes agreement to establish a JV with Corning, Inc.:: Angel Broking,

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Finolex Cables executes agreement to establish a JV with Corning, Inc.
Finolex Cables has executed an agreement with Corning, Inc., USA, to establish a 50/50
equity venture to market select telecommunications products. The venture is expected to be
incorporated later in the year. Corning is the global leader in speciality glass and
ceramics. Details of the agreement, including the size, have not been disclosed as the
company is under a confidentiality agreement. At the CMP, the stock is trading at attractive
valuations of 5.3x its FY2012E EPS and 0.9x its FY2012E BV. We maintain Buy on the stock
with a target price of `82.

Buy Finolex Cables: Price - `47 Target Price - `82: Angel Broking

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Poised for strong top-line growth: Finolex Cables is poised for a
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, 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.

Buy Finolex Cables – 3QFY2011 Result Update -Angel Broking

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Finolex Cables – 3QFY2011 Result Update

Angel Broking maintains a Buy on Finolex Cables with a Target Price of Rs. 82.

For 3QFY2011, Finolex Cables reported top-line growth of 21.4% yoy to `513cr
(`422cr), which was slightly below our estimate of `533cr. Lower gross margins
resulted in OPM declining by 87bp to 9.9% (10.8%) as against our expectation of
10.3%. PAT came in at `26cr, a growth of 113.1% yoy from `12cr in 3QFY2010.
Forex losses fell to `7cr from `11cr a year ago, while the tax rate was 14.0%.
Going ahead, we expect demand from user industries to remain strong. Hence,
we maintain a Buy on the stock.

Finolex Cables (CMP: `59/ TP: `82/ Upside: 39%): Angel Broking Top Pick

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Finolex Cables (CMP: `59/ TP: `82/ Upside: 39%)
􀂄 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.

Finolex Cables Performance Highlights:: 2QFY11 Result Update :: Angel Broking

Visit http://indiaer.blogspot.com/ for complete details 􀂄 􀂄


For 2QFY2011, Finolex Cables posted top-line growth of 21.2% yoy to `491cr,
which was slightly below our expectations. Sales growth was backed by a strong
performance in the electrical cables and others segments, which grew by 38.8%
and 374.4%, respectively. However, OPM continued to remain subdued at 8.5%,
though it improved by 42bp qoq. Owing to strong demand and attractive
valuations, we maintain our Buy rating on Finolex.

Top-line growth remains robust, margins under pressure: In 2QFY2011, the
company’s sales increased due to strong performance in the electrical cables
segment, which showed high volume growth of 23.0%. However, owing to the
company’s inability to pass on high raw-material costs, OPM remained at 8.5%
for the quarter.

Outlook and valuation: Going ahead, demand for low-tension (LT) cables is
expected to remain strong due to bright prospects in its user industries. Sales
would receive a boost in FY2012 when high-tension (HT) and extra-high voltage
(EHV) plants start meaningful contribution to the company’s sales. However,
given the subdued margins in the recent quarters, we revise our OPM estimates
for FY2011 and FY2012 lower to 9.3% and 9.9% from 10.1% and 10.2%,
respectively. We expect PAT to register a 55.4% CAGR over FY2010–12E. At the
CMP, the stock is trading at 11.7x FY2011E and 6.8x FY2012E EPS, respectively.
We maintain Buy on the stock with a revised Target Price of `82 (`85).

Finolex Cables::2QFY2011 results review -Sept 2010 ::Angel broking

Visit http://indiaer.blogspot.com/ for complete details 􀂄 􀂄


Finolex Cables
Finolex Cables announced its 2QFY2011 results. The top line increased by 21.2% yoy to
`490.6, which was slightly below our expectations. However, OPM remained subdued at
8.5% against our expectations of 9.5%. Exceptional losses came in at `12.1cr for the
quarter. As a result of lower-than-expected sales and OPM, PAT declined by 34.1% yoy to
`18.9cr. Currently, the numbers are under review. However, we maintain Buy on the stock.

Finolex Cables (CMP: Rs.59/ TP: Rs.85/ Upside: 45%)- recommends Angel Broking

Finolex Cables (CMP: Rs.59/ TP: Rs.85/ Upside: 45%)
􀂄 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.
􀂄 The rapid ramp up of production at the Roorkee plant has already started
delivering results. The company has further increased the capacity at this plant by
50%. The proximity to the growing North Indian markets and tax benefits from this
plant are expected to boost the turnaround of the company.
􀂄 Company’s derivatives losses are expected to decline going ahead. By FY2012E,
these losses are estimated to decline to Rs 24cr from Rs76cr in FY2010.
􀂄 We believe attractive valuations of 6.3x FY2012E EPS and 1.1x FY2012E BV
provides a good entry point for investors. We have valued the stock at 9x FY2012E
EPS which result into target price of Rs85. Moreover, the company has a holding in
Finolex Industries, which has a book value of Rs152cr but a market value of
Rs483cr. This is not captured in our target price, providing further upside potential.

􀂄 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.
􀂄 The rapid ramp up of production at the Roorkee plant has already started
delivering results. The company has further increased the capacity at this plant by
50%. The proximity to the growing North Indian markets and tax benefits from this
plant are expected to boost the turnaround of the company.
􀂄 Company’s derivatives losses are expected to decline going ahead. By FY2012E,
these losses are estimated to decline to Rs 24cr from Rs76cr in FY2010.
􀂄 We believe attractive valuations of 6.3x FY2012E EPS and 1.1x FY2012E BV
provides a good entry point for investors. We have valued the stock at 9x FY2012E
EPS which result into target price of Rs85. Moreover, the company has a holding in
Finolex Industries, which has a book value of Rs152cr but a market value of
Rs483cr. This is not captured in our target price, providing further upside potential.