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Cable-led growth and new avenues to drive earnings

Strategic entry into optical fiber cables

* RRKABEL is transitioning toward a more cable-led portfolio, with higher-value cables and B2B/institutional demand likely to drive its next phase of growth. Capacity additions are being undertaken in phases, with major high-voltage (HV) capacities scheduled for commissioning during FY27 and the full rollout expected by FY28. The commencement of commercial production at its new 12,000mtpa C&W facility in Silvassa in mid-Sep’26 further supports this expansion, with capacity expected to reach 18,000mtpa by Dec’26.

* The company’s recent acquisition of U M Cables’ optical fiber and related cable business marks its entry into communication cables segment, providing an opportunity to diversify beyond its core C&W business and capitalize on structural growth of India’s optical fiber cable (OFC) market. The acquisition provides access to an established manufacturing platform, enabling it to leverage its procurement capabilities, distribution network and execution expertise to improve capacity utilization, strengthen customer relationships and drive operating efficiencies as volumes recover.

* The recent correction in RRKABEL’s stock price from its Aug’26 peak reflects concerns over intensifying competition, potential pricing pressure in domestic wires and valuation moderation following its rally, rather than a deterioration in its long-term growth prospects. We remain constructive on its mediumterm earnings trajectory, supported by cable-led growth, the capex program, export diversification and a gradual improvement in C&W profitability.

* We estimate revenue/EBITDA/PAT CAGR of ~25%/36%/40% over FY26-28E, with margin expansion and improving cash flows supporting a transition to being a net cash company by FY28E. We value RRKABEL at 35x FY28E EPS to arrive at our TP of INR2,960. Reiterate BUY.

Cable expansion to drive growth and improve profitability

* The company is transitioning toward a more cable-led portfolio, with highvalue cables and B2B/institutional demand expected to drive its next phase of growth. The company’s INR12b capex is focused on increasing the share of cables in its product mix (as ~80% of its planned capex over FY26-FY28 earmarked for cable capacity expansion) and strengthening its exposure to structural growth opportunities across infrastructure, renewables, data centers and power distribution. It is undertaking phased capacity additions at six-month intervals, with major HV capacities scheduled for commissioning during FY27 and the full rollout expected by FY28.

* The expansion will also enable RRKABEL to move up the value chain from 66kV to 220kV extra-high-voltage (EHV) cables, allowing it to address higher-value market segments. Furthermore, existing approvals and certifications provide access to institutional projects, enabling the company to participate in tenders and execute orders without undergoing lengthy qualification processes. It commenced commercial production at its new 12,000mtpa C&W facility (Unit 3) in Silvassa in mid-Sep’26, with capacity expected to reach the planned 18,000mtpa by Dec’26.

* The scale-up of the cable business is expected to emerge as a structural margin driver in the medium term. RRKABEL’s domestic cable EBIT margin currently stands at ~6-7%, below the ~11-12% margin in domestic wires, primarily due to sub-optimal operating scale and a limited presence in high-voltage segments. As new capacities are commissioned, improved product availability, a richer product mix and operating leverage should support a gradual improvement in domestic cable profitability, taking the domestic C&W margin toward a normalized ~10%-11%. Additionally, export cables offer an attractive margin profile of ~12%-13%, and it is pursuing international certifications to increase their contribution to the export mix. The combined benefits of scaling up domestic B2B cables and expanding high-margin export cables are central to achieving management’s Project RRise target of a blended double-digit C&W EBIT margin of 10.5-11.0% by FY28E.

Valuation and view

* We remain constructive on RRKABEL’s medium-term growth prospects, supported by its strong position in domestic wires, expanding cable portfolio, established export network and gradual improvement in C&W profitability. The INR12b cable capex program during FY25-28, including expansion into 220kV EHV cables, is expected to strengthen its presence in higher-value segments, with management targeting ~25% cable volume CAGR and an increase in cable mix by FY28-29. A diversified export footprint should provide a hedge against rising domestic competitive intensity, while operating leverage, a favorable product mix and cost optimization are expected to support margin expansion. Further, premiumization and an anticipated turnaround in the FMEG business by FY28 could provide incremental earnings upside.

* We estimate RRKABEL’s revenue/EBITDA/PAT CAGR at ~25%/36%/40% over FY26-28E. We estimate OPM at 9.1%/9.5% in FY27/FY28E vs. 8.1% in FY26. C&W segment margin is estimated at 9.7%/10.0% in FY27/FY28 vs. 8.9% in FY26. We estimate cumulative OCF to improve to INR15.8b during FY27-28 vs. INR7.9b during FY25-26. We expect cumulative FCF of INR6.0b during FY27-28 vs. INR1.3b during FY25-26. It is estimated to be net cash positive by FY28 vs. net debt of INR2.9b in FY26.

* The recent correction RRKABEL’s stock price from its Aug’26 peak reflects concerns over intensifying competition and valuation moderation rather than a deterioration in its long-term growth prospects. Rising competitive intensity and potential pricing pressure in the domestic wires segment could weigh on margins and challenge the premium valuation following the rally earlier in the year. However, we believe the correction provides an opportunity to reassess the stock’s medium-term earnings potential, supported by cable-led growth, an expanding export presence and the scope for margin improvement. The stock is trading at 34x/27x FY27E/28E EPS. We value RRKABEL at 35x FY28E EPS to arrive at our TP of INR2,960. Reiterate BUY.

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