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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).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
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).
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