Current price 274.70

Sector Cables

No of shares 152939345

52 week high 306.40

52 week low 117.10

BSE Sensex 27396.38

Nifty 8285.60

Average Volume 229218

BSE Code 500144

NSE Symbol FINCABLES

Finolex Cables Ltd.

Recommendation

– BUY/HOLD

Date – 28/04/2015

Company Overview

Finolex Cables Ltd, the flagship company of the Finolex Group was established in 1958 in Pune. Today, it is India's

largest and leading manufacturer of electrical and telecommunication cables with a turnover in excessofRs.16 Billion

(about US $ 320 million).

The company started its operation with the manufacture of PVC insulated electrical cables for the automobile industry.

Since then the Company operates in two segments namely Electrical Cables and Communication Cables. Electrical

cables segment includes the manufacture of 1100 V PVC insulated cables, motor winding PVC insulated cables and

three core flat cables, automotive/battery cables, universal power supply (UPS) cables, heavy duty, underground, low

voltage, power and control cables, and heavy duty, underground, high voltage and power Cables. Its Communication

cables segment include jelly filled telephone cables, local area network (LAN) cables, PE insulated telephone cables

(switchboard cables), coaxial cables, optic fiber V-SAT cables and optic fiber cables. Its Copper Rods includes CCC

rods of 8 mm diameter; electrical switches, which include premium and classic switches, sockets and regulators, and

lamps include retrofit and non-retrofit compact fluorescent lamp lamps, as well as T5 tube lights and fittings. FC is

currently in advanced stages of entering the domestic switchgear market and management believes that they could

leverage their current distribution strength of over 4,000 dealers to make a foray in this market. Overall, the switchgear

market size is estimated by management to be c.INR 60bn

The company has manufacturing facilities at Pimpri and Urse in Pune as well as at Goa & Uttarakhand. The company

has, over the years, established its reputation as an innovative leader and quality manufacturer by continuously

upgrading technology, modernizing manufacturing facilities and maintaining highest standards of quality and services.

Today, the name Finolex has become synonymous with Quality and enjoys overwhelming confidence of the customers.

Investors have also fancied its stock in view of its phenomenal progress leading to a manifold increase on investment in

stock through the years. The current market capitalisation stands at Rs.4239.48 crore.

Category No. of Shares Percentage

Promoters 54,841,170 35.86

General

Public32,663,556 21.36

Other

Companies25,052,759 16.38

NBFC and

Mutual Funds17,956,162 11.74

Foreign

Institutions14,774,190 9.66

Financial

Institutions1,617,683 1.06

Market Cap (Rs Cr) – 4239.48

Company P/E (x) – 19.17

Industry P/E (x) – 22.84

Book Value (Rs) – 72.18

Price / BV (x) – 3.84

Dividend (%) – 80 %

EPS (TTM) – 14.46

Dividend Yield (%) – 0.58 %

Face Value (Rs) – 2

Share Holding Pattern Financial Details

Industry overview

Cable and wire industry has established itself as one of the backbones of modern information age. The increasing importance for

power, light and communication has kept demand high for wire and cable. This trend will continue as demand for reliable,

efficient energy and data communications will strengthen the wire and cable industry. The industry is a volume-driven product

and has evolved from the unorganised to the organised sector. However, about 35 per cent of this industry is still in the

unorganised.

About 40 per cent of the entire electrical industry is composed by wire and cable industry, and it is expected to be double in the

next 5 years. The global wire and cable market is valued at $127 billion in 2010. This market is expected to increase at a 9.4 per

cent CAGR to reach nearly $200 billion in 2015. Due to the good response from the power and infrastructure segments, the wire

and cable industry is growing at a CAGR of 15 per cent. As the new government is focusing on „Make In India,” the industry can

grow at similar rate for the next 5 years.

Investment made by various private companies in power sector has opened up the wire and cable industry. Even the growth

potential in the telecom sector as well as the various policy pronouncements by the government towards bringing about

improved digital connectivity has added advantage to the industry. The rollout of 4G and broadband on a pan-India basis is an

important growth driver because this will boost the market. Government impetus in refineries, power and fertilizers will offe r a

boost to the cable industry as almost all manufacturing companies need cables. Auto sector and railways are also important

sectors consuming wires and cables on a large scale. Power sector is the biggest driver in the mainstay of cable demand,

accounting for more than three-quarters of the market. Telecom cables are confined to the relatively narrower domain of the

health of the global information, communications and technology (ICT) domains. For the industry, the current focus is to supply

cables for specific applications, pertaining to the industry needs. Sectors like oil and gas, metro, cement industry and stee l

industry have a lot of growth potential. The wire and cable industry is also focusing on specialised cables like extra high-voltage

cables and elastomer cables, which are now used for special applications in the industries like oil and gas, shipbuilding,

construction equipment, elevator, renewable power, windmill solutions, security systems and so forth.

The biggest challenge for the industry is operation and service, including reduced lifetime of cables due to mishandling and

deployment times. Increasing price and competition from Chinese imports is also one of the biggest challenges for the industry.

The rising price of copper has also becoming a major issue as it has squeezed the profit margins, and copper has become

uncompetitive in the international market.

Balance Sheet

Mar '14 Mar '13 Mar '12 Mar '11 Mar '10

Sources Of Funds

Total Share Capital 30.59 30.59 30.59 30.59 30.59

Equity Share Capital 30.59 30.59 30.59 30.59 30.59

Reserves 1,072.78 893.73 769.84 686.89 612.52

Networth 1,103.37 924.32 800.43 717.48 643.11

Secured Loans 125.00 143.09 134.26 243.99 246.57

Unsecured Loans 1.69 19.17 20.28 16.06 28.55

Total Debt 126.69 162.26 154.54 260.05 275.12

Total Liabilities 1,230.06 1,086.58 954.97 977.53 918.23

Application Of Funds

Gross Block 1,048.36 916.38 871.37 825.70 802.46

Less: Accum. Depreciation 552.52 504.27 442.14 422.37 383.70

Net Block 495.84 412.11 429.23 403.33 418.76

Capital Work in Progress 10.70 35.73 13.28 30.63 28.83

Investments 403.14 324.09 237.21 245.15 280.28

Inventories 352.40 329.63 281.14 280.84 220.95

Sundry Debtors 145.17 149.65 114.09 129.34 71.05

Cash and Bank Balance 64.86 39.81 32.70 21.28 26.93

Total Current Assets 562.43 519.09 427.93 431.46 318.93

Loans and Advances 91.86 113.12 94.68 104.63 85.72

Fixed Deposits 0.00 0.00 16.30 0.00 10.23

Total CA, Loans & Advances 654.29 632.21 538.91 536.09 414.88

Current Liabilities 243.03 238.24 244.68 220.83 209.95

Provisions 90.88 79.32 18.98 16.85 14.56

Total CL & Provisions 333.91 317.56 263.66 237.68 224.51

Net Current Assets 320.38 314.65 275.25 298.41 190.37

Total Assets 1,230.06 1,086.58 954.97 977.52 918.24

Contingent Liabilities 413.90 536.65 188.73 204.80 209.21

Book Value (Rs) 72.14 60.44 52.34 46.91 42.05

Profit and Loss Account

Mar '14 Mar '13 Mar '12 Mar '11 Mar '10

Income

Sales Turnover 2,359.04 2,270.68 2,182.43 2,186.36 1,726.60

Excise Duty 0.00 0.00 121.05 153.36 111.38

Net Sales 2,359.04 2,270.68 2,061.38 2,033.00 1,615.22

Other Income 58.73 1.16 -12.87 -8.38 -49.62

Stock Adjustments 21.53 29.68 -13.64 63.73 65.25

Total Income 2,439.30 2,301.52 2,034.87 2,088.35 1,630.85

Expenditure

Raw Materials 1,807.55 1,739.29 1,595.95 1,680.60 1,282.84

Power & Fuel Cost 37.07 40.69 32.57 33.24 29.11

Employee Cost 84.83 84.59 69.32 64.41 58.88

Other Manufacturing Expenses 0.00 0.00 2.22 1.62 1.97

Selling and Admin Expenses 0.00 0.00 152.48 125.74 98.02

Miscellaneous Expenses 202.93 206.13 16.71 18.16 15.81

Preoperative Exp Capitalised 0.00 0.00 -0.95 -0.51 -0.87

Total Expenses 2,132.38 2,070.70 1,868.30 1,923.26 1,485.76

Operating Profit 248.19 229.66 179.44 173.47 194.71

PBDIT 306.92 230.82 166.57 165.09 145.09

Interest 14.48 13.38 17.83 19.13 18.69

PBDT 292.44 217.44 148.74 145.96 126.40

Depreciation 48.43 46.63 39.47 38.78 37.23

Profit Before Tax 244.01 170.81 109.27 107.18 89.17

PBT (Post Extra-ord Items) 244.01 170.81 109.27 107.22 80.45

Tax 36.33 25.54 11.08 20.41 22.83

Reported Net Profit 207.68 145.27 98.19 86.78 57.63

Total Value Addition 324.83 331.41 272.35 242.66 202.92

Equity Dividend 24.47 18.35 12.24 10.71 9.18

Corporate Dividend Tax 4.16 3.03 1.98 1.74 1.56

Per share data (annualised)

Shares in issue (lakhs) 1,529.39 1,529.39 1,529.39 1,529.39 1,529.39

Earning Per Share (Rs) 13.58 9.50 6.42 5.67 3.77

Equity Dividend (%) 80.00 60.00 40.00 35.00 30.00

Dividend History

Index and Company Price Movement Comparison

Company Forecast

Name Value Action

RSI(14) 60.084 Buy

STOCH(9,6) 61.913 Buy

STOCHRSI(14) 95.341 Overbought

MACD(12,26) 0.590 Buy

ADX(14) 35.871 Sell

Williams %R -3.378 Overbought

CCI(14) 147.4718 Buy

ATR(14) 2.9000 Less Volatility

Highs/Lows(14) 5.5143 Buy

Ultimate Oscillator 70.346 Overbought

ROC 0.416 Buy

Bull/Bear Power(13) 8.6880 Buy

Technical Indicators

PBIT – 8.29 v/s 7.97

RoCE – 20.17 v/s 19.06

RoE – 20.48 v/s 16.85

Net Profit Margin – 8.62 v/s 6.33

Return on net worth – 18.82 v/s 15.71

D/E Ratio – 0.11 v/s 0.18

Interest Cover – 17.13 v/s 15.49

Current Ratio – 1.96 v/s 1.89

Reserves – 1072.78 cr v/s 893.73 cr

PAT – 207.68 cr v/s 145.27 cr

Total assets – 1230.06 cr v/s 1086.58 cr

Net sales – 2359.04 cr v/s 2270.68 cr

Book Value – 72.14 v/s 60.44

Important Ratios (YoY)

Days BSE NSE

30 279.13 279.38

50 275.64 275.86

150 256.51 256.73

200 244.28 244.49

Simple Moving Average

Investment Rationalize

Finolex Cables Ltd. is amongst the most trusted and largest player in electrical and telecommunication

cables in India with well diversified products mix and with a market capitalization of Rs.4239 crore.

Backward integration helps the company in order to reduce the cost of raw materials as well as to maintain

high of quality and increase its profits margins.

Finolex Cables is having 19 warehouses, which will help the company in order to reduce the logistics

expenses and an impressive network of more than 4000 distributers and 30000 dealers to sell its products

and services.

Government initiative of “Make in India” will provide a good growth opportunity along with the improvement in

Auto, Industrial, State Electricity Boards and Housing sectors will increase the revenue of the company as

most its revenue comes from B2B (Business to Business) transactions.

Entry into Switchgear segment of the market will provide a good growth opportunity to the company as major

market share is held by unorganized players and few major players.

Modernization of telecommunication equipments and entry of 4G via optifibre cables will act as a trigger for

the next level growth of the company.

Profit Before Tax is growing at a CAGR of 22.3% and Net Profit at a CAGR of 29.2% in the last five years

instead of adverse market situations. And Net Profit Margin is at 8.8% and Return on Equity stands at 20.48%.

Company have reduced debt significantly and have more than 85% of its assets as reserve, which can be

used for expansion plans.