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Beat on estimates; C&W continues to post healthy growth Robust volume growth in C&W; FMEG profitability on track

* RR Kabel (RRKABEL)’s 1QFY27 performance was above our estimate, driven by better-than-estimated volume growth in C&W and achieving break-even in its FMEG segment vs. our estimate of segment loss of INR68m. In 1Q, revenue was up ~54% YoY to INR31.7b (~12% beat), whereas EBITDA almost doubled YoY to INR2.8b (~10% beat). OPM surged 2.0pp YoY to 8.9%. Adj. PAT surged 2.2x YoY to INR1.9b (~20% above estimates, aided by higher other income).

* Management indicated that the company’s C&W volume growth was ~17% YoY, led by strong growth across domestic and exports. Margin expansion was driven by operating leverage, better fixed-cost absorption, an improvement in product mix, and ongoing cost optimization initiatives. Despite near-term volatility in raw material prices, it expects demand to remain resilient and reiterated its FY28 margin guidance of 10.5% in C&W. Domestic cable margins are likely to improve further over the medium term. In the FMEG segment, RRKABEL reiterated its target of ~20% annual revenue growth and sustainable break-even in FY27E.

* We raise our EPS estimates by ~8%/6% for FY27-28 due to higher volume growth estimates and improving profitability in FMEG. The stock is trading at 37x/30x FY27E/FY28E EPS. We value RRKABEL at 35x FY28E EPS to arrive at our revised TP of INR2,960 (vs. INR2,800 earlier). Reiterate BUY.

C&W revenue rises ~57% YoY; margin at 9.9% (est. 9.6%)

* Consol. revenue/EBITDA/Adj. PAT stood at INR31.7b/INR2.8b/INR1.9b (up 54%/2.0x/2.2x YoY and ~12%/10%/20% above our estimates). Gross margin expanded 35bp YoY to ~19%. Employee costs increased ~38% YoY (at ~4.1% of revenue vs. 4.5% in 1QFY26). Other expenses increased ~26% YoY (at 5.5% of revenue vs. 6.8% in 1QFY26). The depreciation/interest increased ~46%/74% YoY, while other income jumped 2.7x YoY.

* Segmental highlights: 1) C&W: Revenue increased ~57% YoY to INR28.8b, and EBIT increased 2.0x YoY to INR2.9b. EBIT margin improved 2.3pp YoY to 9.9%; and 2) FMEG: Revenue increased ~28% YoY to INR2.9b. The segment reached break-even vs. a loss of INR71m/INR93m in 1QFY26/4QFY26.

Valuation and view

* RRKABEL’s 1QFY27 earnings exceeded our estimates, driven by strong volume growth in C&W and healthy performance in FMEG segments. The company’s volume growth in C&W at ~17% YoY was above the industry growth estimated at ~10-12%. The management remains focused on outperforming industry growth in the C&W business by increasing its presence in the higher-value cables and B2B segments. The margin improvement in the C&W segment was also encouraging, led by positive operating leverage and an improvement in product mix. Management believes it will achieve sustainable break-even in FY27 in the FMEG business.

* We estimate RRKABEL’s revenue/EBITDA/PAT CAGR at ~25%/36%/40% over FY26-28. We estimate OPM at 9.2%/9.6% in FY27/FY28 vs. 8.1% in FY26. The stock is trading at 37x/30x FY27E/28E EPS. We value RRKABEL at 35x FY28E EPS to arrive at our revised TP of INR2,960 (earlier INR2,800). Reiterate BUY.

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