Dear All,
Forwarding you the Result Update on Finolex Cables for 4QFY2011 with a Buy recommendation and a Target Price of `75 (12 months).
Finolex Cables (Finolex) reported healthy top-line growth of 16.3% yoy to `539cr, which was slightly above our estimates of `526cr. However, OPM was much below our estimates at 7.4%. This was mainly due to high volatility in copper prices and higher sales in the low-margin copper rods segment. However, due to
lower-than-expected forex losses and tax outgo, PAT came in above our estimates at `19cr. Going ahead, the outlook for the business remains positive, given the growth prospects in user industries and higher sales from the high-tension (HT) cables plant.
Volume growth for the year at 10%: Finolex reported volume growth of 10% for FY2011. Going ahead also, the outlook for volume growth remains positive. Realisations were higher during the year, due to high copper prices. The electrical cables segment recorded strong 37.9% yoy growth during the quarter. The commissioning of the extra high voltage (EHV) cables plant has been delayed due to construction issues.
Outlook and valuations: 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 by 71bp and 50bp to 9.1% and 9.2%, respectively. Overall, we expect sales to grow at a 16.7% CAGR over FY2011–13E, while PAT is expected to post a CAGR of 37.1% over the same period. At the CMP, the stock is trading at 4.7x its FY2013E EPS. We maintain our Buy rating on the stock with a revised target price of `75 (`82).
Kindly click on the following link to view the Report.
If you have any further queries, feel free to call us on 022 39357600, Extn: 6865 or mail us at advisory@angelbroking.com
With best regards,
Fundamental Advisory Desk
Angel Broking
Akruti Star,6th Floor, Road No.7,MIDC, Andheri (E),Mumbai – 93.
Call : (91) (022) 39357600 Ext. 6865
Website : www.angelbroking.com
Disclaimer: Ours is an advisory role. The final decision and consequences based on our information is solely yours. Moreover, in keeping with regulatory guidelines, we do not guarantee any returns on investments. Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice.
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