Finolex Cables' Shares End Higher After Brokerages Raise Target Price
Finolex Cables posted better-than-expected earnings in the quarter-ended December.
Shares of Finolex Cables Ltd. ended higher on Tuesday, after swinging between gains and losses as analysts raised their target price following the third quarter earnings beat.
The company reported better-than-expected earnings in the quarter ended December.
"Improved demand outlook, looking up for market share gain," Phillip Capital said, in a note.
Finolex Cables Q3 Earnings (Consolidated, YoY)
Revenue from operations rose 18% to Rs 1,150.31 crore, as against an estimate of Rs 1,100 crore.
Net profit gained 8% to Rs 154.31 crore, compared with a forecast of Rs 103.08 crore.
Ebitda rose 23% to Rs 145.89 crore.
Ebitda margin stood at 12.7% vs 12.2%.
The stock closed 5.75% higher at Rs 597.8 per share, compared with a 0.89% gain in the benchmark Nifty. The scrip traded five times its 30-day average volume.
Through the day, the stock fell as much as 1.31% before it reversed losses and surged as much as 7.20% to Rs 606.
Of the nine analysts tracking the company, seven maintained 'buy' rating, and two recommended 'hold', according to Bloomberg data. The return potential stood at 15.9%. The relative strength index was 68.
Here's what analysts said:
Jefferies
Retains a 'buy' rating and raises the target price to Rs 710 from Rs 655, implying a potential upside of 26%.
Views Finolex as a play on capex and housing revival, with construction wires at over 50% of its sales mix.
Electrical cables are a key catalyst.
Company's communication segment likely to benefit from capex and 5G rollout by telcos.
Despite a 25% uptick in the past six months, the company still trades at an inexpensive FY24 price to earnings multiple of 15x, a steep discount to most peers.
Raises FY23–26 earnings per share by over 6–7%.
Forecast FY22–25 sales and PAT CAGR at 17% and 21% respectively, with over 140 basis points increase in operating margins.
Construction slowdowns and sharp volatility in copper prices are key risks.
Better traction in margin-accretive segments and new capex could support growth as well.
Phillip Capital
Maintains a 'buy' rating and raises the target price to Rs 865 from Rs 693, implying a potential upside of 54%.
Expect electrical W&C volumes to start picking up in the short term given the gradual improvement in construction and infrastructure activities.
Volatility in commodity prices may cap the margin.
Expects company to improve its electrical cables volume in the medium term, with improvement in economic activities
The company may see market share gains from the regional or unorganised market.
Expects revenue growth of 14% and 13% in fiscal 2024 and fiscal 2025 for electrical cables.
Predicts strong revenue growth of 33% and 21% in fiscal 2024 and fiscal 2025, respectively, for the FMEG portfolio.
Improved demand outlook; looking up for market share gain.