Target: ₹2,200
CMP: ₹1,717.15
RR Kabel’s Q4-FY24 revenue growth of 16 per cent y-o-y was in-line with our estimates; though EBITDA at ₹115 crore came below our estimate of ₹130 crore. EBIT margin of cables & wires was at 8.7 per cent v/s estimated 9 per cent and EBIT loss of FMEG segment was at ₹19.40 crore v/s estimated ₹18.10 crore. OPM at 6.6 per cent (est. 7.3 per cent) and profit was at ₹78.70 crore vs. estimated ₹84.70 crore. Cables & Wires volume growth stood at 19.6 per cent y-o-y (and 6.5 per cent q-o-q) in Q4-FY24.
- Also read: Broker’s call: Moil (Buy)
Management remains optimistic for cables and wires demand growth and expects its volume to grow about 20 per cent y-o-y in FY25. Margin of Cables and wires is expected to further improve by 1.0-1.2pp y-o-y in FY25. In the FMEG segment, it targets to achieve revenue of ₹1,000 crore in FY25 (growth of 29 per cent y-o-y) and expects it to become break even by Q1-FY26.
We recently initiated coverage on RR Kabel with a Buy rating. It posted a 22 per cent profit CAGR over FY19-24, and we expect an EPS CAGR of 44 per cent over FY24-26. We value RR Kabel at 40x FY26E EPS to arrive at our TP of ₹2,200.