About the Company

Finolex Cables, the flagship company of the Finolex Group was established in 1958 in Pune. Today, it is country’s biggest and leading maker of electrical and telecommunication cables with a turnover in excess of Rs.16 Billion (about US $ 320 million).

Finolex Cables started its operation with the making of PVC insulated electrical cables for the automobile industry.

Since then, Finolex Cables has constantly endeavored to expand its product range to embrace

• PVC insulated single core and multicore industrial Flexible Cables
• Rodent Repellent Multicore Flexible Cables
• PVC insulated electrical wires and Flame Retardant Low Smoke electrical wires
• XLPE 3 Core Flat Cables, Power and Control Cables
• PVC Insulated Winding Wires and 3 Core Flat Cables
• High Voltage Power Cables (Up to 33 kV)
• Auto & Battery Cables, Co–axial and CATV cables, LAN Cables, Switchboard Cables
• Fibre Optic Cables
• Polyethylene Insulated Jelly Filled Telephone Cables

The Company has manufacturing facilities at

• Pimpri
• Urse in Pune
• Goa
• Uttarakhand

Finolex Cables is in our list of Multibagger stocks in Dynamic Levels.Finolex Cables' share price has touched a 52 week high of Rs.304.90 on 30-Mar-2016 and a 52 week low of Rs. 202.20 on 20-Jan-2016.

Expansion & New Products

During the year 2015, the Company expanded its manufacturing capacities of LAN, Coaxial and Optical Fiber Cable product lines at both Urse and Goa. The added capacities will improve the Finolex ability to acquire a more market share for these products. The switchgear facility in Roorkee is also completed. New products from the Lamp/ Lighting business, electrical cables for solar applications and an entirely new range of switches etc are in pipeline.

Finoswitch is one of their front runners in their new range of consumer facing products. Today's consumer is knowledgeable and looks for products that are comprehensive. Finoswitch blends style and substance seamlessly. With a high performance promise of 100,000 clicks assured and stylish Italian finish with a range of colors and styles, it is sure to make a mark in the market.

The next significant feature that consumers of tomorrow will expect from most products is ‘technology that brings forward simplicity through automation’. Their new range of TOUCH SWITCH will do just that. Simple touch function will facilitate multiple controls in terms of room lighting and mood. The switch will also be enabled with voice control to take the interaction to a whole new level.

Operational Review:

Sales:

• Copper Rods (net of interdivisional transfers and including Excise Duty) at Rs. 1,060 million as compared to Rs.1,187 million in the previous year
• Communication cables (including Excise Duty) at Rs.2,445 million as compared to Rs.2,272 million in the previous year.
• Electrical Cables (including Excise Duty) at Rs.21,919 million as compared to Rs. 21,329 million in the previous year.

Production:

• Optical Fibre Cables at 33,948 KM as compared to 31,023 KM in the previous year.
• Electrical Cables at 50,716 MT as compared to 54,423 MT in the previous year.
• Metal based communication Cables at 5,607 MT as compared to 5,576 MT in the previous year.

Conclusion

In terms of outlook for the upcoming year, sales of Optical Fiber Cables look hopeful with the Government’s announcements about the Digital India Program. In an increasingly connected world, a growing number of devices are anticipated to use broadband connections to bring a wide array of rich communication and multimedia services, anywhere, anytime. Similarly, the government’s focus on infrastructure Power Sector would attract investments in cabling

Electrical cables are the main focus area of business for the Company. In the long term the outlook is positive – construction sector appears positive especially given the governments drive towards Housing For All by 2022; agricultural applications also appear positive and poised to continue on the growth shown in the previous years; automobile and infrastructure (power), however seem to be going through a slower growth path at this moment. In the long term, however, the outlook for the entire segment is positive, given the fact that sustained economic growth of the country depends on a robust and stable infrastructure.

With the impetus from the Government in giving superior and quicker internet access to pastoral India, Finolex believes that demand for communication products will be robust for the foreseable future

The Government is promoting use of CFLs and now LED based lamps. Keeping in mind the probable growth in CFL demand Finolex Cables has built capacity in T3 and T4 type CFLs and has also launched the latest T5 tube lights and fittings in the market. There has been a shift in the customer preference towards LED based lamps especially in the lower wattage range – the price differential between CFL and LED based lamps is the lowest in this category

As per our estimate, the stock at CMP of 280 is trading at P/E of 21.07, The Debt Equity ratio is 0.04 with interest coverage ratio of 23.32 the return on equity is 15.70% and the return on asset is 19.85%

On the basis of above factors we recommend a buy in Finolex Cables for long term with a target of Rs.350