Target: ₹1,872
CMP: ₹1,580.10
We revise our FY25E/FY26 earnings estimate upward by 1.2/4 per cent and maintain the ‘Buy’ rating, as we value the stock at 35x FY26 EPS to arrive at a revised target price of ₹1,872 (earlier ₹1,800).
We met with the management of RR Kabel to gauge the domestic demand, competitive scenario, and capacity expansion. The company has maintained its healthy volume growth guidance in the W&C segment at 15-20 per cent and expects 10 per cent margins in the near term in the W&C segment, given the strong demand outlook in sectors and measures to improve margins.
The company is expected to grow faster than the industry on account of product expansion, premiumisation and network expansion. Over the past three years, the company has expanded its retail touchpoints from 25k to 65k and aims to achieve 500k touchpoints within the next five years.
We believe RR Kabel will continue to benefit on account of its strong brand, diverse product portfolio, well-structured capacity expansion plans, increasing dealers/distribution network and distribution led export business.
We estimate Revenue/EBITDA/PAT CAGR of 21.7/40.9/46.4 per cent over FY23–26.