RR Kabel Q4 Results Review - Aiming For Sustainable Margin Improvement: Motilal Oswal

Motilal Oswal Report

R R Kabel Ltd.’s Q4 FY24 revenue growth of 16% YoY was in-line with our estimates; though Ebitda at Rs 1.15 billion came below our estimate of Rs 1.3 billion. Ebit margin of cables and wires was at 8.7% versus estimated 9% and Ebit loss of FMEG segment was at Rs 194 million versus estimated Rs 181 million. Operating profit margin at 6.6% (estimate: 7.3%) and profit was at Rs 787 million versus estimated Rs 847 million. Cables and wires volume growth stood at 19.6% YoY (and 6.5% QoQ) in Q4 FY24.

Management remains optimistic for cables and wires demand growth and expects its volume to grow ~20% YoY in FY25. Margin of cables and wires is expected to further improve by 1.0-1.2% YoY in FY25.

In the FMEG segment, it targets to achieve revenue of Rs 10 billion in FY25 (growth of 29% YoY) and expects it to become break even by Q1 FY26.

We recently initiated coverage on R R Kabel with a Buy rating. R R Kabel posted a 22% profit CAGR over FY19-24, and we expect an EPS CAGR of 44% over FY24-26.

We value R R Kabel at 40 times FY26E EPS to arrive at our target price of Rs 2,200.

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