Shares of a leading consumer electrical company in India with a strong presence in Fast Moving Electrical Goods (FMEG) surged by 2 percent on BSE to Rs. 1,559.85 during the trading session of Tuesday.
With a market capitalisation of Rs. 17,610.3 crores, at 10:08 a.m., the shares of R R Kabel Limited were trading in the green at Rs. 1,557.65, up by 1.88 percent, as compared to its previous closing price of Rs. 1,528.95.
Brokerage Target:
The international brokerage firm Citi initiated a ‘buy’ rating on R R Kabel Limited and assigned a target price of Rs. 2,300 per share, representing a potential upside of nearly 48 percent from the current trading price of Rs. 1,557.65.
The brokerage maintained its buy rating and raised the target price, citing strong growth potential.
As of FY24, RR Kabel is one of India’s largest exporters of wires and cables from India with nearly 10 percent market share of the exports market, and is the fourth largest player in the Indian Wires and Cables(W&C) industry by value.
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Brokerage Outlook:
Analysts at Citi are optimistic due to the management’s confidence in achieving a 60-80 basis points (bps) expansion in EBIT margins for the wires and cables (W&C) segment in FY25.
They also anticipate a 25-30 percent year-on-year growth in the fast-moving electrical goods (FMEG) segment, with a target to reach breakeven in the next 3-4 quarters, and a 20 percent YoY growth in exports for FY25.
Citi further noted that the wires and cables industry is benefiting from robust structural tailwinds, including infrastructure capital expenditure, Production Linked Incentive (PLI) schemes, and a real estate upcycle in India.
Financials:
The company experienced significant growth in its revenue from operations, showing a year-on-year rise of around 13.2 percent from Rs. 1,597 crores in Q1 FY24 to Rs. 1,808 crores in Q1 FY25.
Revenue from the W&C segment registered nearly 11 percent growth in Q1FY25 compared to Q1 FY24, driven by volume growth in both wires and cable domestic business.
However, the segment margin decreased by 160 bps in Q1 FY25 from Q1 FY24, primarily due to reduced contributions caused by fluctuations in raw material prices.
Revenue from the fast-moving electrical goods (FMEG) segment grew ~32 percent in Q1 FY25 over Q1 FY24, fueled by strong volume growth in fans, appliances, and switches. Despite significant advertising expenses, the segment’s loss in Q1 FY25 was limited due to an increase in the contribution margin.
In contrast, the company’s net profit declined from Rs. 74 crores to Rs. 64 crores during the same period, marking a 13.5 percent year-on-year decrease.
On a year-on-year basis, the operating Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA) fell from Rs. 113.6 crores in Q1 FY24 to Rs. 95.4 crores in Q1 FY25, registering a decline of 16 percent.
Marginal decline in operating EBITDA and PAT due to contraction in contribution and increase in advertisement and other expenses.
The EBITDA margin decreased by 183 basis points, from 7.1 percent to 5.3 percent, and the PAT margin dropped by 109 basis points, from 4.7 percent to 3.6 percent during the same period.
Stock Performance:
The stock has delivered positive returns of nearly 27.8 percent in one year, as well as around 9.6 percent returns in the last six months. However, so far in 2024, it has given about 3 percent of negative returns.
Shares of R R Kabel hit its 52-week high at Rs. 1,903.3 on 27th May, and compared to its current trading price of Rs. 1,557.65, the stock is trading at a discount of nearly 19 percent.
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About the company:
Founded in 1999, R R Kabel Limited is mainly engaged in the business of manufacturing PVC insulated wires and cables, power cables and special cables.
The company is India’s largest exporter of wires and cables, offering a wide range of electrical products including wires & cables, fans, lighting, electrical accessories, and appliances for residential, commercial, industrial, and infrastructural purposes.
Written by Shivani Singh
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