Phillip Capital (India) has a buy call on Finolex Cables with a target price of Rs 635.
The current market price of Finolex Cables is Rs 471.35.
Time period given by the brokerage is one year when Finolex Cables price can reach the defined target.
Outlook and valuation by Phillip Capital
Finolex Cables' product categories (current and planned), the inherent strength of its business model, and its superior reach offer investment comfort, especially in a sluggish economic environment.
With its cash flows and balance-sheet strength, its valuations will gradually align with its peers (Havells, V-guard).
We see it transforming into a multi-product electrical company over the next 2-3 years.
We have revised earnings estimates by 6 per cent/5 per cent mainly on account of increasing TAX rate (Roorkee benefits expires).
We maintain BUY, but revised our target multiple to 23x (30 per cent discount to consumer electrical Industry) from 25x, mainly on account of revision in industry PE and slower pick up in new products.
Our revised target at Rs 635 (Rs 760 earlier) at a PE of 20x (30 per cent discount to the consumer electrical industrys PE of 32x).
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