Finolex Cables Q2 Results Review - Healthy Demand Outlook; Margin Trajectory, Key Monitorable: Systematix

Systematix Research Report

Finolex Cables Ltd.’s consolidated profit after tax (down 62% YoY) was marred by high-cost inventory and inferior product mix (auto/industrial cables, ~100 basis points impact), resulting in ~250 bps QoQ margin contraction.

Continued traction in housing markets sustained the demand for house wires (volume/revenue up 10%/12% YoY). Led by optic fiber cables, the communication cables segment too revived (revenue up 58% YoY in H1 FY23); momentum will sustain on government’s thrust on digitisation and 5G rollout.

But, decent profitability in fast moving electrical goods is taking long, given Finolex Cables’s slow ramp up. Post a weak Q2, we have cut FY23E earnings per share by 17%, expecting lower margins and profit share from its joint ventures/associate (mainly Finolex Industries Ltd.), but broadly retain our FY24E EPS.

Despite 15% revenue compound annual growth rate, we expect flattish profit after tax over FY22-24E, as we expect profits in Finolex Industries to fall.

Click on the attachment to read the full report:

DISCLAIMER

This report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.