Anand Rathi is bullish on Finolex Cables has recommended buy rating on the stock with a target price of Rs 598 in its research report dated November 16, 2018.
Anand Rathi's research report on Finolex Cables
As PAT declined 7% y/y owing to muted (2% y/y) revenue growth and the EBITDA margin contracted 205bps y/y, Finolex Cables’ Q2 was weak. We hence cut our earnings estimates and expect consolidated revenue/PAT to clock 11%/21% CAGRs over FY18-20, aided by higher growth in optical-fibre cables and the newer electrical goods. On the significant re-rating in the past five years, further re-rating depends on success in its new product categories, significant improvement in JVs while keeping going the earnings growth momentum in its core businesses. We maintain our Buy recommendation with a revised target price of `598 (19x FY20e P/E).
Outlook
We like Finolex Cables for its leading position and well-diversified business model in electrical and communication cables and its strong balance sheet. Owing to earnings revision we reduce our target price from `649 to `598 (19x FY20e EPS), while retaining our Buy recommendation.
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