Finolex Cables: Preserve ‘purchase’ as volumes develop
Per FNXC mgmt, estimated market measurement is at Rs 15bn and firm targets market share of 15-20% over time.
After 4 qtrs of YoY gross sales decline, FNXC noticed a pointy restoration (+18%) in Q3. Volumes throughout most classes improved, each YoY and QoQ. Electrical wires grew by +7% and Communication Cables & New Merchandise by +25%. B2C gross sales combine at 65-70%. FNXC’s technique is to concentrate on higher distribution for enhancing development. Capex stays on monitor. Internet money at Rs 14.8bn. Factoring profit from potential Housing upcycle, we increase FY22-24e by 4-5%. Valuation undemanding. Purchase.
Efficiency: FNXC’s Q3FY21 standalone gross sales/EBITDA beat JEF, at Rs 8.3bn / Rs 1.1bn (+18%/15% YoY). Volumes throughout most product classes improved, each YoY and QoQ. Nevertheless, op-margin was a tad weaker at 12.8% (-40bps), impacted by -160 bps dip in gross margin to 25.2%. Advert-spend at Rs 50mn (~1% of gross sales). PAT was in-line at Rs 0.8bn (+3%). New Product Launch: Conduit Pipe & Equipment (19″-32″ diameter in Mild, Medium and Heavy stress specs). Per FNXC mgmt, estimated market measurement is at Rs 15bn and firm targets market share of 15-20% over time.
Electrical Cables (83% of Combine): Includes, Building Wires: 60%-65%, Auto, Agriculture, and Industrial (Versatile) at 25% and three) Energy at 10%. Q3 gross sales at Rs 6.9bn (+19% YoY). EBIT margin stood at 14.2% (-180 bps YoY). All sub-categories, besides energy cables, demonstrated wholesome development. Whereas Wires noticed 9% quantity uptick, Auto cables grew by +30%. B2C accounts for 65-70% of FNXC’s gross sales combine, whereas B2B (30-35%) primarily contains Communication (Optic Fiber), Energy and Auto Cables.
Communication Cables (12% of Combine): Key product is Optic Fibre Cables (~60% of combine). Q3 gross sales grew by +7% YoY to Rs 958mn, whereas EBIT margin dipped by -90 bps to three.2%.
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