Accumulate R R Kabel Ltd for the Target Rs. 1,516 By Prabhudas Liladhar Capital Ltd
RRKABL reported moderate revenue growth of 13.9% YoY, driven by moderate 16.2% growth in W&C segment. W&C saw 6.5% volume growth, with wires increasing ~10% and cables, ~2%. RRKABL expects strong 18% volume growth in FY26 driven by cables. The company reiterated its W&C EBIT margin improvement guidance of 100bps for FY26, with its earlier guidance of 300bps improvement by FY28, and expects the FMEG segment to break even by H2FY26. Growth is expected to be driven by the cables segment, with its capacity set to double from FY23 levels and anticipated volume growth of 12% in wires and 25% in cables in FY26. We upward revise RRKABL FY26/FY27 earnings by 1.7%/2.1% factoring in the margin improvements. We estimate revenue/EBITDA/PAT CAGR of 17.3%/31.0%/33.2% over FY25-27E. We maintain ‘Accumulate’ rating with revised TP of Rs1,516 (earlier Rs1,485) based on 31x FY27E earnings.
Revenue grows 13.9%, PAT up by 39.4% YoY: Revenue grew by 13.9% YoY to Rs20.6bn (PLe: Rs20.3bn). W&C revenue grew by 16.2% YoY to Rs18.3bn (PLe: Rs18.1bn), and volumes grew 6.5% YoY. FMEG revenue declined by 2.1% YoY to Rs2.3bn (PLe: Rs2.1bn). Export revenue contribution was ~29%/33% to total /W&C sales. Gross margins expanded by 80bps YoY to 18.2%. EBITDA grew by 49.6% YoY to Rs1.4bn (PLe: Rs1.4bn). EBITDA margins expanded by 170bps YoY to 6.9% (PLe: 6.8%). PAT grew by 39.4% YoY to Rs897mn (PLe: Rs894mn). W&C EBIT grew 23.1% YoY to Rs1.4bn and margins expanded by 40bps YoY to 7.6%. FMEG reported EBIT loss of Rs71mn vs loss of Rs207mn in Q1FY25.
Con-call highlights: 1) RRKABL expects 18% volume growth in FY26. 2) W&C volume grew by 6.5% in Q1FY26 with wires increasing by 10% and cables, 2%. 3) W&C mix stood at 70:30, which is expected to shift to 65:35 by FY26. 4) RRKABL expects 20-25% growth in its FMEG segment for FY26. 5) Fans contributed 50% to the FMEG portfolio, followed by lighting at 30%, appliances at 10%, and the remaining from other products. 6) In FMEG segment, 20% of its revenue came from premium products. 7) The management has guided for EBIT margin improvement of 100bps for W&C segment in FY26. 8) FMEG segment is expected to break even in H2FY26. 9) The company has incurred capex of Rs500–750mn in Q1FY26, and total capex of Rs3bn has been planned for FY26. 10) The company has planned capex of Rs12bn over FY26-FY28 with an incremental revenue of Rs45bn. 11) Working capital days decreased to 52 days in Jun’25 from 56 days in Mar’25. 12) Current capacity utilization for cables is 90-95% and wires, 70%.
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