Buy RR Kabel Ltd For Target Rs.2,930 by Choice Institutional Equities Ltd
Strong Volume Growth and Higher Commodity Prices Drive Q1FY27
RRKABEL reported a robust start to FY27E, with 17% volume growth driven by a healthy demand across domestic and export markets. Elevated copper prices boosted realisation through the industry's cost pass-through mechanism, enabling revenue growth to outpace volumes while preserving margin. Continued operating leverage and an improving product mix supported further margin expansion, reinforcing the business outlook
Valuation & View
We have revised our estimate upwards and expect Revenue/EBITDA/PAT to expand at a CAGR of 20%/24%/28%, respectively, over FY26–FY29E. The revision is driven by a robust volume growth, commodity-led realisation, improving product mix, operating leverage from capacity expansion. The medium-term growth outlook for the wires and cables industry also remains favourable, supported by sustained investments in power infrastructure, real estate, industrial capex and renewable energy. Taking the DCF- based approach, we value RRKABEL at INR 2,930 (vs. INR 1,910), driven by upward revision in estimate. Our valuation implies a PE of 40x on FY28E EPS of INR 72.9 and PEG of 1.4. We maintain our BUY rating on RRKABEL.
Q1FY27 Growth Led by Strong Volume Expansion and Robust Profitability
* Revenue increased 53.9% YoY to INR 31.7 Bn, supported by 17% YoY volume growth, reflecting a healthy demand across domestic and export markets.
* EBITDA rose 99.3% YoY to INR 2.8 Bn, with EBITDA margin expanding 200 bps YoY to 8.9%, driven by operating leverage, better product mix and continued cost discipline.
* PAT grew 128.6% YoY to INR 2.1 Bn, aided by higher operating profitability
C&W Continues to Drive Growth; FMEG Nears Breakeven
* C&W revenue increased 57.1% YoY to INR 28.8 Bn, with EBIT margin improving 230 bps YoY to 9.9%, supported by a healthy volume growth and execution.
* FMEG revenue grew 28.1% YoY to INR 2.9 Bn. Segment losses narrowed down further, indicating continued progress towards breakeven through operating leverage and portfolio rationalisation.
Capacity Expansion to Support Next Leg of Margin Improvement
* Project RRISE is progressing as planned, with ~80% of the INR 12 Bn capex allocated to the cables business. The company plans to incur ~INR 6.5 Bn of capex in FY27, with new capacities at Silvassa (wires) and Waghodia (cables) expected to come online.
* Improving utilisation of the expanded facilities, combined with operating leverage and a richer product mix, should support further EBITDA margin expansion over the medium term.
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SEBI Registration no.: INZ 000160131
